RBNZ likely to maintain status quo - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, suggests that the expectations from RBNZ have swung back to no change from 2.25%: as Bloomberg eloquently puts it “New Zealand Rate-Cut Bets Cool with Housing ‘Going Nuts’".

Key Quotes

“Indeed, there’s now just a 32% chance seen of a 25bp cut to 2.00%, down from 80% a month ago, as rising fuel prices, government tax increases on cigarettes and new infrastructure spending, and that ‘nutty’ housing market leave the Reserve Bank less room for manoeuvre. If that is the case then surely NZD will be back above 0.70 in short order for the first time since early May. Moreover, it may well stay there through the summer/winter if the Fed and the RBNZ are both on hiatus. Of course, the risk is that in turn will result in Septembrist murmurings and a potentially Red October in some parts of the economy.

Of course, those conflicting pressures on central banks are nothing new in our new normal. The Fed is feeling them just as the RBNZ and the RBA are, while the BOJ (Q1 GDP notwithstanding) and the ECB are hardly breathing easy. Clearly some new thinking is going to be needed at some point, especially if things do start to look bloody after the summer holidays.”