30 Jan 2014
Flash: RBNZ gave clear signal hike -coming in March - Westpac
FXstreet.com (Bali) - The Reserve Bank of New Zealand left the OCR on hold at 2.5%, as Westpac Economists had expected.
Key Quotes
"However, the Bank gave the clearest possible signal that the OCR will rise in March in the second-last paragraph of the press release: "...inflationary pressures are expected to increase over the next two years. In this environment, there is a need to return interest rates to more-normal levels. The bank expects to start this adjustment soon." This was very much as we expected.
"The economic case for hiking the OCR is clear, but the RBNZ is better off waiting for the superior communication opportunity offered by the March MPS before actually pulling the trigger."
"Rates markets went into the statement pricing roughly a 30% risk of a hike. With that risk removed, it was not surprising to see the two year swap rate fall from 2.84% to 2.78%, and NZD/USD fall from 0.8265 pre-meeting to around 0.8180 then back to 0.8210. Markets are pricing a 25bp hike for the March MPS meeting, which we view as appropriate."
Key Quotes
"However, the Bank gave the clearest possible signal that the OCR will rise in March in the second-last paragraph of the press release: "...inflationary pressures are expected to increase over the next two years. In this environment, there is a need to return interest rates to more-normal levels. The bank expects to start this adjustment soon." This was very much as we expected.
"The economic case for hiking the OCR is clear, but the RBNZ is better off waiting for the superior communication opportunity offered by the March MPS before actually pulling the trigger."
"Rates markets went into the statement pricing roughly a 30% risk of a hike. With that risk removed, it was not surprising to see the two year swap rate fall from 2.84% to 2.78%, and NZD/USD fall from 0.8265 pre-meeting to around 0.8180 then back to 0.8210. Markets are pricing a 25bp hike for the March MPS meeting, which we view as appropriate."