13 May 2015
Sense of disappointment after RBNZ FSR - BNZ
FXStreet (Bali) - Craig Ebert, Economist at Bank of New Zealand (BNZ), notes that there is probably a sense of disappointment after the RBNZ FSR.
Key Quotes
"As for what this morning’s FSR means for the markets, if anything there is probably a sense of disappointment that the RBNZ didn’t bring out a bigger housing hammer, for sooner (as all the excitement and gossip was for). NZD initially fell (as Bloomberg’s selected headlines hit the wires). However, it has since rebounded to be clearly above its 8:59am point. That looks to be a good read on this morning’s FSR, in the context of expectations."
"On rates, there was not much action. Wholesale yields tried to fall, but failed. As such, they are still pricing about a 50-50 chance of an OCR cut next month (while also trying to digest the recent back-up in some global bond yields, from the incredibly low levels they had been bid down to)."
"We always thought it would be strange, even mad, for a central bank to come out expressing great concern about a big chunk of the nation’s housing market…then cut its policy rate the very next month. This is especially when it’s concurrently highlighting the risks, internationally, of such extremely low interest rates, and the distortions that they are causing (including the forced search-for-yield issue). New Zealand should keep resisting, as much as possible, that slippery slope, is our view."
"Yet we realise that some in the markets will still want to see these tweaked LVR rules as being a cover for the Bank cutting its policy rate in short shrift."
"Our view remains; of an unchanged OCR for the foreseeable future, while noting the increasing possibility of some policy rate reduction later on this year. And depending on some macro factors that will take some time to judge, not any immediate data on the housing market."
Key Quotes
"As for what this morning’s FSR means for the markets, if anything there is probably a sense of disappointment that the RBNZ didn’t bring out a bigger housing hammer, for sooner (as all the excitement and gossip was for). NZD initially fell (as Bloomberg’s selected headlines hit the wires). However, it has since rebounded to be clearly above its 8:59am point. That looks to be a good read on this morning’s FSR, in the context of expectations."
"On rates, there was not much action. Wholesale yields tried to fall, but failed. As such, they are still pricing about a 50-50 chance of an OCR cut next month (while also trying to digest the recent back-up in some global bond yields, from the incredibly low levels they had been bid down to)."
"We always thought it would be strange, even mad, for a central bank to come out expressing great concern about a big chunk of the nation’s housing market…then cut its policy rate the very next month. This is especially when it’s concurrently highlighting the risks, internationally, of such extremely low interest rates, and the distortions that they are causing (including the forced search-for-yield issue). New Zealand should keep resisting, as much as possible, that slippery slope, is our view."
"Yet we realise that some in the markets will still want to see these tweaked LVR rules as being a cover for the Bank cutting its policy rate in short shrift."
"Our view remains; of an unchanged OCR for the foreseeable future, while noting the increasing possibility of some policy rate reduction later on this year. And depending on some macro factors that will take some time to judge, not any immediate data on the housing market."