The NZD is higher after the rate hike, not so much on the fact of the hike (this was the most well-telegraphed central bank rate hike in the history of the entire universe … OK, that’s hyperbole, but seriously, picking a central bank rate hike doesn’t get much easier than this) but because RBNZ forward clues about the likely, accelerated pace of hikes.
- Adam pinpointed the critical paragraph of the statement in this post: New Zealand hikes rates to 2.75% from 2.50% and this in particular: “The Bank is commencing this adjustment today. The speed and extent to which the OCR will be raised will depend on economic data and our continuing assessment of emerging inflationary pressures” (my bolding).
Also:
- the bank’s 90-day interest forecast was raised by 23bp for December 2014 (this implies an official cash rate then of 3.75% … prior to the announcement the market had priced in 3.64% by December 2014 – i.e a positive surprise (albeit only small)
- The RBNZ extended the forecast to 2017, signalling its projected terminal rate of at least 5%, compared to earlier the market had priced in a 4.50% terminal rate. This is an even bigger positive surprise
