NZD drops heavily after the larger than expected rate cut
Key points:
Projections, RBNZ:
- sees official cash rate at 1.21 pct in december 2019 (pvs 1.48 pct)
- sees official cash rate at 0.92 pct in September 2020 (pvs 1.36 pct)
- sees official cash rate at 0.91 pct in December 2020 (pvs 1.36 pct)
- sees official cash rate at 1.59 pct in September 2022
- sees TWI NZD at around 72.8 pct in September 2020 (pvs 72.7 pct)
- sees annual CPI 1.7 pct by September 2020 (pvs 1.7 pct)
RBNZ says rate cut demonstrates commitment to meeting inflation target
- says global economic outlook has weakened
- says low rates, higher govt spending will support demand
Reserve Bank of New Zealand minutes:
- committtee agreed larger initial monetary stimulus would best ensure meeting inflation and employment objectives.
- the lower ocr path reflected the economic projections and the balance of risks discussed.
- members noted that estimates of the neutral level of interest rates have continued to decline
- committee noted that low business confidence had dampened business investment in 2018 and had remained weak in mid-2019
- members noted that heightened global uncertainty was reducing investment and suppressing trading-partner growth
- members noted this highlighted the risk of a larger or more prolonged slowdown in global economic growth.
- committee agreed that the balance of risks to achieving cpi and employment objectives tilted to downside
more to come
