A preview of the Reserve Bank of New Zealand monetary policy decision due 2000GMT on 11 March 2015 from Westpac
A summary of the Westpac preview:
We expect that the RBNZ will leave the OCR on hold at 3.5%
- The accompanying press statement is expected to have a broadly neutral tone and signal that rates are likely to remain on hold for some time
- Central to what the RBNZ does next week is how they are viewing the outlook for inflation over the next couple of years... over the coming months we expect it to fall even further
- However, on its own, we don't think that the current weakness in inflation is enough to prompt the RBNZ to shift to an easing bias
Before cuts from the RBNZ are a realistic possibility, there would need to be the risk of a significant disruption to economic or financial conditions ... On this front, there are some concerns
- Dry conditions are continuing to weigh on agricultural production
- Dairy export prices ... still well down on their levels from last year
- Total basket of New Zealand's export commodities, prices are currently down around 17% compared to last year
- NZD is lingering at elevated levels
- Outlook for domestic demand continues to look firm ... underpinned by strength in the housing and construction sectors ... supporting more generalised increases in demand
The tone of Thursday's press statement is expected to echo that of the January OCR review which signalled an extended pause, but kept the RBNZ's options open
- Strength in the housing market isn't just a concern for the RBNZ in terms of controlling inflation. Strong growth in house prices, if not consistent with wider economic fundamentals, also raises risks for financial stability
