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

 


RBNZ face challenging decision on Thursday

RBNZ face challenging decision on Thursday


By Garry Dean (Sales Trader, CMC Markets New Zealand)

The key focus for the New Zealand dollar will be the Reserve Bank on Thursday morning, with the market widely expecting the OCR to be increased 25 pts to 3.25%. The variance among market forecasters sits around the revisions contained within the June Monetary Policy Statement, and more importantly the projected trail of OCR increases going forward. While Governor Wheeler’s forecasts in March suggested an OCR at 4.50% by the end of 2015, the market has digested a number of weaker economic releases over the past three months, and are currently pricing-in a rate closer to 4.00% at this time.

This expectation of more moderate OCR increases has led major trading banks to reduce two year fixed mortgage rates by over a quarter of a percent in the past couple of months, and this creates headwinds for the RBNZ in their battle to control non-tradable inflation pressures. The RBNZ decision is certainly a tough call given the declines seen in both business and consumer confidence recently, combined with the 23% collapse in dairy prices over the past four months, but a significant easing in OCR projections would potentially fuel another surge in the housing market. The inability of the government to appropriately address the key factors behind the surge in Auckland property prices has left the Reserve Bank Governor with a major dilemma, and one which is extremely hard to resolve through the use of LVR restrictions and OCR increases.

With the RBNZ only likely to adjust their interest rate projections slightly, there is a risk the market has adopted too dovish a tone, with interest rates and the Kiwi at risk of adjusting higher post the announcement. We saw the Kiwi rally significantly following the first two OCR hikes in this cycle, resulting in a threat of currency intervention from the RB Governor in early May, but potential exists for a similar short-term spike in the currency post the announcement. A bearish technical picture of the Kiwi had been building with the break of key support at 0.8500 at the end of May, but recent spikes to 0.8555 have clouded this view, and leaves the door open for a renewed push higher if the RBNZ disappoints the market on Thursday.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Budget Building Battle: Bill English Blames Council On Housing

The Nation: Finance Minister blames Auckland Council for housing shortage, saying it is responsible for land, housing and infrastructure supply in the city, while government provides rental subsidies... More>>

ALSO:

Megiaglommeration: NZME And Fairfax Apply For Authorisation To Merge

The Commerce Commission has received an application from Wilson and Horton Limited (trading as NZME) and Fairfax NZ Limited seeking authorisation to merge their media operations in New Zealand. More>>

ALSO:

Brewing: Lion To Buy Cult Upper Hutt Brewer Panhead

Lion - Beer, Spirits and Wine (NZ), New Zealand's biggest beer maker, has agreed to buy Panhead Custom Ales from the family of founder Mike Neilson, its second such purchase of a popular craft brewer after the acquisition of Dunedin-based Emerson's Brewing Co in 2012. More>>

ALSO:

Half Empty: Fonterra's 2017 Opening Forecast Below Expectations

Fonterra Cooperative Group raised its forecast farmgate milk payout for next season by less than expected as the world's largest dairy exporter predicts lower prices will crimp production and supply will pick up. The New Zealand dollar fell. More>>

ALSO:

Pest Control: Mouse Blitz Team Leaves For Antipodes

The Million Dollar Mouse project to rid Antipodes Island of mice is underway with the departure of a rodent eradication team to the remote nature reserve and World Heritage Area. More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news