Monday 20th March 2017
|Text too small?|
The Reserve Bank of New Zealand is widely expected to keep interest rates on hold at a record low 1.75 percent on Thursday and to reiterate the risks are finely balanced.
All 11 economists polled by BusinessDesk expect rates to remain on hold with the median showing no chance of a rate hike or cut. The odds of governor Graeme Wheeler lifting the rate this week is also zero, according to the overnight interest swap curve.
In February, the central bank kept interest rates on hold and signalled that a rate increase wouldn't be on the cards until mid-2019. In a subsequent speech, Wheeler said the bank sees the risks evenly balanced in respect to the official cash rate, which could go either up or down, depending on whether there was an unexpected shock. Thursday's statement is expected to reiterate that view.
"We expect the bank to reiterate concluding comments in their February 2017 monetary policy statement that 'monetary policy will remain accommodative for a considerable period'," said First NZ Capital's director, economics and strategy Chris Green.
Economists are still widely tipping the bank to remain on hold for some time although several expect a rate hike as early as May 2018 given recent signs of inflation.
In the short-term, however, "we expect the RBNZ to maintain a very neutral tone at this week’s OCR Review, reinforcing our view that significant global uncertainties and independent changes to retail interest rates buy it time amidst a rising inflation profile," said ANZ Bank New Zealand chief economist Cameron Bagrie.
Last week's weaker-than-expected gross domestic product data served to reinforce this view. Westpac Banking Corp noted while near-term inflation is looking a bit stronger, growth in activity has fallen short of the RBNZ’s very optimistic forecasts and the "risk is that the economy simply may not have enough puff to generate the sustained lift in inflation pressures that the RBNZ is looking for."
The economy expanded 0.4 percent in the December quarter, less than half the 1 percent gain that the central bank forecast in February.
Kiwibank chief economist Zoe Wallis pointed to several "surprising developments" since the central bank's February rate decision, including a fall in GDP growth, a lower currency, a drop in global oil prices and price indicators suggesting a jump in near-term inflation. "The sum total of these events suggests that risks to future inflation remain fairly balanced and the RBNZ is likely to keep the current level of policy stimulus for some time," she said. Wallis doesn't expect any action from the central bank until 2019.
No comments yet
Aussie operations key to growth at Fletcher Building, CEO says
NZ dollar gains vs euro as ECB's Draghi notes moderating growth
While you were sleeping: Facebook, AMD lift Wall St
MARKET CLOSE: Tegel jumps 37% on takeover offer; Westpac, ANZ drop as banking scandal continues
Timber King, NZ Steel Distributor ordered to pay $401k over steel mesh misrepresentations
NZ dollar holds near 3 1/2-month low on higher US bond yields; ECB awaited
Alibaba CEO Daniel Zhang to meet business, govt leaders in trip to NZ
USX: Rangatira Investments appoints Mark Dossor as its Chief Executive
Rangatira hires ACC CFO Mark Dossor as new chief executive
Govt, Auckland Council release $28bn plan for transport over next decade