RBNZ: Wheeler buying time, defied the hawks – TDS

Analysts at TDS explain that the RBNZ left the cash rate at 1.75% as unanimously expected but, by leaving the cash rate profile unchanged from February, the Bank defied rapidly rising expectations of a much more hawkish message.

Key Quotes

“The reference to the exchange rate needing further depreciation was dropped from the statement given the TWI has depreciated by 5% since February. For once, this omission had next to no impact on the currency.”

“The NZD slumped from $US0.694 to $US0.683 on the flat cash rate profile and the OIS 1yr curve has flattened, with May OIS easing from 162% to 120% for one rate hike.”

“We await the tone of the Bank’s message under Governor Spencer before bringing forward our first hike from May 2018, but a November hike is highly unlikely in our view.”