9 Dec 2014
RBNZ Preview: Remaining on hold - Nomura
FXStreet (Bali) - The RBNZ could increase the currency rhetoric later on the week, notes Charles St-Arnaud, Economist at Nomura, adding that their core view is for the RBNZ to keep rates unchanged until 2016.
Key Quotes
"The Reserve Bank of New Zealand (RBNZ) holds its next policy meeting on 11 December. At the 30 October policy meeting, the RBNZ left its policy rate unchanged at 3.50%."
"The accompanying statement signalled that the central bank no longer believes that rate hikes will be necessary in the near future, saying that "a period of assessment remains appropriate before considering further policy adjustment", removing the reference to the need for higher rates to keep inflation near the target. Economic data since the September meeting have been mixed."
"However, they show that the domestic economy remains resilient, while commodity prices have continued to decline, with milk prices falling by more than 10% since the October meeting."
"Moreover, further falls in oil prices should provide some support to the economy and reduce the negative terms of trade shock. We believe that the RBNZ statement will continue to show that the central bank remains confident in the economic outlook, especially in the light of the recent data. However, this will likely be in contrast with the fact that the RBNZ is likely to continue to express concerns that the global economy, except the US economy, continues to soften."
"Moreover, the further decline in oil prices means that the central bank should expect inflation to remain weak and even moderate further. The NZD has appreciated since the October meeting. Until recently, the NZD tradeweighted index was back to the level it was before Governor Wheeler warned that FX interventions were likely."
"While the currency has depreciated in recent days, as the USD gained following the strong nonfarm payroll release, we believe that the RBNZ will reiterate that the NZD "level remains unjustified and unsustainable" and there is a high probability it will increase its rhetoric on the level of NZD. This could come in the statement, but it could also be reinforced in Governor Wheeler‟s press conference."
"Our view remains that the RBNZ will keep rates unchanged until 2016."
Key Quotes
"The Reserve Bank of New Zealand (RBNZ) holds its next policy meeting on 11 December. At the 30 October policy meeting, the RBNZ left its policy rate unchanged at 3.50%."
"The accompanying statement signalled that the central bank no longer believes that rate hikes will be necessary in the near future, saying that "a period of assessment remains appropriate before considering further policy adjustment", removing the reference to the need for higher rates to keep inflation near the target. Economic data since the September meeting have been mixed."
"However, they show that the domestic economy remains resilient, while commodity prices have continued to decline, with milk prices falling by more than 10% since the October meeting."
"Moreover, further falls in oil prices should provide some support to the economy and reduce the negative terms of trade shock. We believe that the RBNZ statement will continue to show that the central bank remains confident in the economic outlook, especially in the light of the recent data. However, this will likely be in contrast with the fact that the RBNZ is likely to continue to express concerns that the global economy, except the US economy, continues to soften."
"Moreover, the further decline in oil prices means that the central bank should expect inflation to remain weak and even moderate further. The NZD has appreciated since the October meeting. Until recently, the NZD tradeweighted index was back to the level it was before Governor Wheeler warned that FX interventions were likely."
"While the currency has depreciated in recent days, as the USD gained following the strong nonfarm payroll release, we believe that the RBNZ will reiterate that the NZD "level remains unjustified and unsustainable" and there is a high probability it will increase its rhetoric on the level of NZD. This could come in the statement, but it could also be reinforced in Governor Wheeler‟s press conference."
"Our view remains that the RBNZ will keep rates unchanged until 2016."