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11 Dec 2014
RBNZ: No further hikes until Dec 2015 - ANZ
FXStreet (Bali) - Cameron Bagrie , Chief Economist, and Sharon Zollner, Senior Economist, at ANZ, shared their take on today's RBNZ policy decision, noting that no further hikes are expected until December 2015.
Key Quotes
"As universally expected, the Reserve Bank left the OCR on hold at 3.50%. Some observers, particularly offshore, might be surprised by the business-as-usual tone of the summary (“Some furtherincrease in the OCR is expected to be required at a later stage”), and indeed the NZD response, jumping a full cent,suggests this was the case. However, the numbers don’t lie: the 90-day rate projections have been revised
down 30bps over the latter part of the projection. Low inflation buys optionality. Persistently low inflation and falling commodity prices (not just dairy, also oil) have tilted the near-term inflation risk profile further to the downside despite plenty of domestic economic momentum and a non-trivial risk of housing market resurgence."
"The key message was that the NZ economy is nicely positioned at present, with solid growth but low inflation. The OCR remain on hold and “further policy adjustments will depend on data emerging over the assessment period.” The main risks to the outlook are identified as “dairy prices, which are expected to recover in 2015, the overvalued exchange rate, and the strength of construction activity. Inflation risks include the impact of rising capacity pressures on domestic inflation, the response of house prices to the strong migration inflows, and the impact of lower oil prices.” We agree with all of that."
"Consistent with Reserve Bank forecasts, we expect no further hikes until December 2015 and only a gradual tightening thereafter. That’s our baseline forecast, but even a modest hiking cycle such as that is highly conditional on the NZD, the global scene holding together, commodity prices finding a floor, and the NZ economy achieving solid grow."
Key Quotes
"As universally expected, the Reserve Bank left the OCR on hold at 3.50%. Some observers, particularly offshore, might be surprised by the business-as-usual tone of the summary (“Some furtherincrease in the OCR is expected to be required at a later stage”), and indeed the NZD response, jumping a full cent,suggests this was the case. However, the numbers don’t lie: the 90-day rate projections have been revised
down 30bps over the latter part of the projection. Low inflation buys optionality. Persistently low inflation and falling commodity prices (not just dairy, also oil) have tilted the near-term inflation risk profile further to the downside despite plenty of domestic economic momentum and a non-trivial risk of housing market resurgence."
"The key message was that the NZ economy is nicely positioned at present, with solid growth but low inflation. The OCR remain on hold and “further policy adjustments will depend on data emerging over the assessment period.” The main risks to the outlook are identified as “dairy prices, which are expected to recover in 2015, the overvalued exchange rate, and the strength of construction activity. Inflation risks include the impact of rising capacity pressures on domestic inflation, the response of house prices to the strong migration inflows, and the impact of lower oil prices.” We agree with all of that."
"Consistent with Reserve Bank forecasts, we expect no further hikes until December 2015 and only a gradual tightening thereafter. That’s our baseline forecast, but even a modest hiking cycle such as that is highly conditional on the NZD, the global scene holding together, commodity prices finding a floor, and the NZ economy achieving solid grow."