{"id":156061,"date":"2019-09-24T14:15:40","date_gmt":"2019-09-24T18:15:40","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=156061"},"modified":"2019-09-24T11:16:09","modified_gmt":"2019-09-24T15:16:09","slug":"a-hold-for-the-rbnz","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/09\/a-hold-for-the-rbnz\/","title":{"rendered":"A Hold For The RBNZ?"},"content":{"rendered":"
September 24, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

New Zealand will be closing the latest cycle of interest rate meetings of the major central banks around the world.<\/p>\n

The global bias continues to be on the easing side, with the exception of Norway. There hasn\u2019t been much improvement in the economic situation in New Zealand. However, it\u2019s too early to really see an impact from the 50 basis point cut that happened last time.<\/p>\n

In early August, the expectation was for two cuts during the rest of the year. And it seems the RBNZ was trying to get ahead of the market by getting it over with, in one meeting.<\/p>\n

Such drastic measures \u2013 the equivalent of four cuts within half a year \u2013 have left investors, traders and analysts more concerned about the country\u2019s economic future. What can we expect going forward?<\/p>\n

What We Are\u00a0<\/strong>Looking For<\/strong><\/h2>\n

The consensus view is that the RBNZ will want to see the effects of their latest action and\u00a0hold the OCR where it is at a record low of 1.0%.<\/strong><\/p>

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We can expect\u00a0the bank to reiterate that they are ready for more action should it be warranted.\u00a0<\/strong>Therefore, a continuing of\u00a0a substantial dovish tone. There is no press conference scheduled for after the meeting. This is usually a sign that no action will be taken.<\/p>\n

However, given the aggressive stance on rate cuts by Governor Orr and the new Monetary Policy Committee (MPC), no analyst really rules out the possibility of this being a \u201clive\u201d meeting.<\/p>\n

There is still a minority less than 10% chance that a rate cut could be forthcoming. And the market appears to be pricing this in.\u00a0We might see a minor \u201ctightening\u201d bump in the NZD following a hold, as a consequence.<\/strong><\/p>\n

Going Forward<\/strong><\/h2>\n

The bank\u2019s sudden action last month blew away the consensus expectation that there would be a further rate cut by the end of the year.<\/p>\n

Now, RBNZ trackers are a little more cautious about policy predictions. The consensus is still that by April next year, the OCR will be at 0.75% (in other words, one more rate cut). However, there is hardly any consensus on\u00a0when<\/em>\u00a0within that interval it will happen.<\/p>\n

The MPC continues to be unanimous in its decisions, which gets in the way of tracking shifting views on the board, such as\u00a0what happens with the Fed.<\/a><\/p>\n

It now seems that unanimity is a feature of the RBNZ and that the potential of a split vote is becoming increasingly unlikely.<\/p>\n

It\u2019s All Down Until It\u2019s Not<\/strong><\/h2>\n

As rates are slashed around the world, there is an increasing chorus \u2013 even among central bankers \u2013 of concern over both the unintended consequences and the effectiveness of close-to-zero-or-below rates.<\/p>\n

This especially relevant for New Zealand (and Australia) as it traditionally keeps rates high in order to attract foreign investment. Even with the Fed cutting rates last week, the appeal of Kiwi carry trades is waning. We would expect this to further drag down the NZD.<\/p>\n

Employment figures remain near structural level, just as they did last time before they slashed rates. And, inflation had ticked up a bit.<\/p>\n

This has led many analysts to question whether the RBNZ\u2019s rate path is actually a good idea. The criticism considers that the policy is in response to external factors such as the effect of the trade war, and structural issues that are beyond the purview of the bank. Those analysts form what\u2019s called the \u201cshadow board\u201d, which is showing increasing division about the rate path.<\/p>\n

The Bank is Not Alone<\/strong><\/h2>\n

Regardless of the concerns from analysts, there isn\u2019t much expectation of a let-up in economic pressures in the near term.<\/p>\n

The RBNZ<\/a>\u00a0has been at the forefront of the race to the bottom in interest rates. And without much change in the data since the start of the cutting cycle, there is an argument that more measures are needed.<\/p>\n

However, there is also reason to question whether more of the same will accomplish anything. We\u2019ll be really keen to see this month\u2019s data, and the quarterly figures that start coming out in a couple of weeks\u2019 time.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex New Zealand will be closing the latest cycle of interest rate meetings of the major central banks around the world. The global bias continues to be on the easing side, with the exception of Norway. There hasn\u2019t been much improvement in the economic situation in New Zealand. However, it\u2019s too early to really […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-156061","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/156061","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=156061"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/156061\/revisions"}],"predecessor-version":[{"id":156063,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/156061\/revisions\/156063"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=156061"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=156061"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=156061"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}