Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


The RBNZ Observer: A rate hike expected

The RBNZ Observer: A rate hike expected


New Zealand’s economy is beginning to boom, boosted by the post-earthquake rebuild in Canterbury and strong housing and dairy prices
- Growth and inflation are running ahead of the RBNZ’s previous expectations, which we think will trump concerns over the high level of the NZD

- While finely balanced, we expect the RBNZ is likely to raise the cash rate by 25bps at next week’s meeting, in order to keep ahead of the game on inflation


A close call, but RBNZ expected to raise rates

New Zealand’s economy is beginning to boom. Post-earthquake reconstruction, solid house price growth, a rapid run up in export prices and very accommodative policy are providing a significant boost to growth. After registering quarterly GDP growth of +1.4% q-o-q in Q3 (an annualised rate of +5.7%), recent business surveys have suggested that the economy is likely to have expanded at a similar pace in Q4.

With these drivers in place, the RBNZ had already signalled, in its last official statement (12 December) that rate hikes would be needed by April this year. Since that statement, both inflation and growth have surprised the RBNZ on the upside and forward indicators also suggest that there is more momentum than the central bank was forecasting.

The challenge for the central bank is that the NZD still remains high and has also risen since then. But, in our view, the stronger economy and higher inflation are likely to trump concerns over the elevated exchange rate. The economy is already operating at capacity, demand is booming and inflation is ahead of expectations. Interest rates need to rise soon if the central bank is to meet its inflation goals.

We see the RBNZ as likely to hike by 25bp next week.

The decision is, however, still a close call, with the main risk being that they wait until March to move. This would allow the rate hike to be accompanied by their official statement and give them the opportunity to present a full set of projections, rather than the one-page summary that will accompany next week’s announcement. But, on balance, we think this is unlikely to hold them back, given that the RBNZ’s medium-term outlook is still intact and the Governor is already scheduled to give a public address the day after the decision. We expect them to ring in the New Year with a rate hike.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Balance Of Trade: NZ Posts Trade Deficit In October On Falling Dairy Exports

New Zealand’s posted its largest monthly trade deficit for October in six years, while narrowing the shortfall from September, led by a fall in dairy exports to China while all main imports into the country rose. More>>

ALSO:

Gigatown Winner: Plenty Of Positives For Dunedin

Although the city has taken the Gigatown title, along with new ultrafast 1Gbps broadband and funding for $700,000 worth of UFB-related initiatives across the community, Mr Cull says Dunedin has gained so much more through its involvement. More>>

ALSO:

R18: The Warehouse Group Praised For Removing Games

The decision by New Zealand’s largest retailer The Warehouse Group (TW Group), to withdraw stocks of the latest version of Grand Theft Auto V (GTA V) and other R18 games, has been praised by advocacy group Stop Demand Foundation. More>>

ALSO:

Air NZ Wine Awards: Victory For Villa Maria As Pinot Noir Thrills

It was a night to remember as Villa Maria Estate picked up one of the highest accolades of the evening, the O-I New Zealand Reserve Wine of the Show Trophy, at the 28th Air New Zealand Wine Awards. The Villa Maria Single Vineyard Southern Clays Marlborough ... More>>

ALSO:

Future Brighter Money: RBNZ Releases New Bank Note Designs

New Zealand’s banknotes are getting brighter and better, with the Reserve Bank today unveiling more vibrant and secure banknote designs which will progressively enter circulation later next year. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news