Not even low NZ CPI will change hawkish stance by RBNZ - RBS

FXStreet (Bali) - In view of RBS FX Strategists, even a weak headline CPI print today (22.45GMT) is unlikely to prompt a change in the hawkish stance from the RBNZ.

Key Quotes

The "full steam ahead" approach to monetary policy tightening by the RBNZ paired with a general quest for carry has left NZD close to multi-year highs."

"The RBNZ forecasts an uptick in the y/y inflation rate from 1.5% to 1.7% y/y in the second quarter, which is slightly below the Bloomberg listed consensus of +1.8%."

"The Bank’s tightening cycle has begun despite the fact that the Bank does not expect headline inflation to return to the 2.0% target until the second quarter of next year."

"This is because RBNZ's expectation for higher inflation largely rests on non-tradeables inflation – on a y/y basis, tradeables inflation has fallen in 8 consecutive quarters while non-tradeables inflation jumped 3.0% y/y in the March quarter, highest since 3Q 2011."

"As a result, even a weak headline print is unlikely to prompt a change in stance from the RBNZ if non-tradeables inflation pressure remains robust."