28 Apr 2014
RBNZ to hikes rates again in June, July - BNZ
FXStreet (Bali) - Kymberly Martin, Senior Market Strategist at BNZ, expects the RBNZ to continues its process to ‘normalise’ the OCR by hiking rates in the next two meetings before pausing ahead of the September election.
Key Quotes
"The RBNZ is not due to publish a full set of forecasts until its 12 June meeting. However, there is nothing to suggest the RBNZ has strayed from its intention to raise the OCR to at least 5.00%, by 2016."
"The outlook for the currency in coming months will, however, be crucial to the near-term outlook. The NZ Trade Weighted Index (TWI), at 80.0, is currently some 2% above the level the Bank had projected for the June quarter average. If it stays at current levels, or rises further, it will reduce inflationary pressures. i.e. a stronger NZD will reduce the cost of imported goods, helping reduce the overall rise in CPI. The RBNZ could then feel inclined to slow its pace of rate hikes."
"We will therefore be watching the currency closely in coming months. For now, our central case remains the RBNZ will raise the OCR again by 0.25% at each of its June and July meetings, before pausing ahead of the September election."
"We continue to anticipate the OCR will reach 5.00% by the end of next year. Similarly, we believe the RBNZ remains intent on raising the OCR to this level, at least. Our discussion around the currency does not fundamentally impact this end-game. However, if an anticipated decline in the currency takes longer to unfold than we currently forecast, it could imply a somewhat slower pace of rate hikes."
Key Quotes
"The RBNZ is not due to publish a full set of forecasts until its 12 June meeting. However, there is nothing to suggest the RBNZ has strayed from its intention to raise the OCR to at least 5.00%, by 2016."
"The outlook for the currency in coming months will, however, be crucial to the near-term outlook. The NZ Trade Weighted Index (TWI), at 80.0, is currently some 2% above the level the Bank had projected for the June quarter average. If it stays at current levels, or rises further, it will reduce inflationary pressures. i.e. a stronger NZD will reduce the cost of imported goods, helping reduce the overall rise in CPI. The RBNZ could then feel inclined to slow its pace of rate hikes."
"We will therefore be watching the currency closely in coming months. For now, our central case remains the RBNZ will raise the OCR again by 0.25% at each of its June and July meetings, before pausing ahead of the September election."
"We continue to anticipate the OCR will reach 5.00% by the end of next year. Similarly, we believe the RBNZ remains intent on raising the OCR to this level, at least. Our discussion around the currency does not fundamentally impact this end-game. However, if an anticipated decline in the currency takes longer to unfold than we currently forecast, it could imply a somewhat slower pace of rate hikes."