SUMMARY OF RBNZ RATE STATEMENT
Global Outlook
- Global growth is below trend.
- Volatility in global markets has increased in recent weeks.
- The prospects for global growth and commodity prices remain uncertain.
- Political uncertainty remains.
- Weak global conditions and low interest rates relative to New Zealand are placing upward pressure on the New Zealand dollar exchange rate.
- High exchange rate continues to place pressure on the export and import-competing sectors.
- A decline in the exchange rate is needed.
Domestic Outlook
- Outlook for dairy prices' full season remains very uncertain.
- House price inflation remains excessive, posing concerns for financial stability.
- Headline inflation is being held below the target band by continuing negative tradable inflation.
- Annual CPI inflation is expected to weaken in the September quarter.
- Annual inflation is expected to rise from the December quarter, but the sustained weakness in headline inflation risks further declines in inflation expectations.
Conclusion
Monetary policy will continue to be accommodative. Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range. We will continue to watch closely the emerging economic data.
What does it mean for the kiwi
With the much dovish tone from the RBNZ, we are expecting the upside to be limited for the kiwi. With the potential and possibility that we might see another rate cut this year, coupled with the clear message that a strong kiwi is not desired, we are seeing any rally as potential short opportunities.
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