HALISTER1: Economists Split on Timing of RBNZ Move After Statement: Roundup

Economists Split on Timing of RBNZ Move After Statement: Roundup

(Bloomberg) -- RBNZ’s decision to remain ’accommodative for a considerable period’ surprised economists who say the central bank’s tone and forecasts seem disconnected from the current economic data, economists say
  • None have revised their RBNZ rate calls just yet
  • ANZ Wellington, Cameron Bagrie chief economist
    • Describes RBNZ’s tone as aggressively neutral, with the central bank leaving its projected OCR profile unchanged
    • Puzzled on some aspects of RBNZ’s statement, as the inflation forecasts seem to be testing realms of credibility given an economy that’s forecast to grow above trend
    • Maintain view that RBNZ will raise rates in May 2018
    • RBNZ is quietly smug about the tightening in policy being applied by the banking sector; a factor under- appreciated by the market
  • CBA Sydney, Richard Grace chief currency strategist
    •  The statement is very neutral, with the RBNZ noting “developments since the February MPS on balance are considered to be neutral for the stance of monetary policy”
    • RBNZ’s interest rate forecasts show no change to its timing for the first OCR rise in late 2019 against CBA’s expectations the central bank would bring forward the timing of the first rate hike to 2H 2019
    • Still sees RBNZ lifting interest rates in November 2018
  • Goldman Sachs Sydney, Andrew Boak economist
    • Appreciates RBNZ’s reluctance to turn hawkish “too early” given fairly recent end of the easing cycle in Nov 2016 and the experience of tightening rates in 2014
    • However, the reasons for RBNZ’s easing to current levels now seem far less relevant: below-target inflation, elevated NZD, fragile global growth, break-down of inflation expectations and falling dairy prices
    • Upside risk to inflation and wages seen over 2H 2017 with the market pricing just +5bp of tightening by November 2017
    • GS maintains view for RBNZ to raise rates 25bps in November 2017
    • Risk-reward favors positioning for higher rates on this timeframe
  • Nomura Singapore, Peter Dragicevich FX strategist
    • Overall message was dovish, particularly relative to expectations of a more upbeat assessment across the markets ahead of the meeting
    • Updated longer-term forecasts were little changed, with the OCR track still showing only a tentative start of a tightening cycle in 2H 2019
    • Expectations of a rate hike in 2Q or 3Q of 2018 remain in place at this stage

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Andrew Boak (Goldman Sachs Group Inc/The)
Cameron Bagrie (Anz Natl Bank Ltd)
Peter Dragicevich (Nomura Holdings Inc)
Richard Grace (Commonwealth Bank of Australia)

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