RBNZ seen on hold until H2 2018 - UOB Group

BUSINESS NZ dollar down on geopolitical tensions 10 Aug 2017 5:16pm 2 minutes to read

The RBNZ earlier on Thursday kept rates on hold at a record low of 1.75 percent and reiterated its neutral stance while acknowledging some softer domestic economic data.

The RBNZ doesn't project higher rates until the third quarter of 2019, according to its forecasts released in the accompanying monetary policy statement, in line with its previous predictions. Inflation has slowed more than economists forecast and economic growth has disappointed on the downside.

Monetary policy will remain accommodative for a considerable period.

"A lower New Zealand dollar is needed to increase tradables inflation and help deliver more balanced growth", Gov. Wheeler said.

The central bank expected growth to speed up, supported by low interest rates, strong population growth and fiscal stimulus in the 2017 budget.

But Wheeler, who leaves the job next month, said headline inflation was likely to decline and the outlook for tradables inflation was weak.

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WELLINGTON, Aug 10 (Reuters) - The Reserve Bank of New Zealand stuck firmly to its neutral stance on Thursday, saying there was no need to cut rates given a likely pick-up in inflation and appeared to be less anxious about the country's strong currency than some expected.

Despite growth globally becoming more broad-based "inflation and wage outcomes remain subdued across the advanced economies, and challenges remain with on-going surplus capacity", Mr Wheeler said.

ASB chief economist Nick Tuffley said the OCR outlook was "not as "dovish" as expected".

"The underlying message will be that the RBNZ is in no hurry to join some other major central banks in looking to remove policy accommodation".

"You've seen good output and employment growth over the last five years, but you've seen weak productivity growth", Wheeler said.

"House-price inflation continues to moderate due to loan-to-value ratio restrictions, affordability constraints, and a tightening in credit conditions", Wheeler said. The New Zealand Dollar and local front-end government bond yields initially struggled to find direction. "This moderation is expected to persist, although there remains a risk of resurgence in prices given continued strong population growth and resource constraints in the construction sector".

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