RBNZ
The RBNZ rate statement was exactly as expected. There were no major changes and Governor Orr did his part to try and talk down the NZD. However, the RBNZ did upgrade growth forecasts to reflect the improving NZD economy. See here for the preview which recognised that.
The headline numbers
- The rate was kept unchanged at 0.25%. This was as expected without even any outliers expecting anything different in terms of economists being polled
- The bond purchases (Large Scale Asset Purchases - LSAP) were kept the same at $100 billion.
The economic outlook
The statement recognised the lift in activity both globally and within New Zealand. However, the statement recognised the problem with the strength of the NZD. This is one factor the RBNZ will be concerned about as it makes it harder for New Zealand exporters. This was acknowledged.
The economic outlook was still considered uncertain by the RBNZ
The path for the NZD
The reaction out of the meeting was a NZD dip that was bought. This was almost certainly on the reference to negative rates and the RBNZ saying they could use them. Although true in theory the RBNZ are unlikely to now , but want to give the NZD every chance of falling lower to help their exporters. So, before the meeting any dips lower would have been buying opportunities as highlighted here. One key aspect to note is that the RBNZ needs to give reference to the overheated housing market. That is potentially a game changer and I will follow that up with a post next week as to why that could be the case.
