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

 


RBNZ Observer: On hold, with a longer pause now expected

The RBNZ Observer: On hold, with a longer pause now expected

- Having delivered 100bp of hikes and with dairy prices falling, the RBNZ is expected to hold steady next week

- Timely indicators of business and consumer sentiment have stepped back from high levels, although inward migration remains strong and the Canterbury rebuild is on-going


- Given some easing in conditions and the dairy price fall, we now expect the RBNZ to be on hold for the rest of this year, with the next hike expected in Q1 2015 (previously Q4 2014)

The RBNZ has time on its side
The rate hikes are over for now. With 100bps of interest rate hikes delivered between March and July, the RBNZ made it clear at the last meeting that it is on hold for the time being. And recent activity indicators suggest that some of the shine has been taken off the economy’s boom – meaning an extended pause from the RBNZ looks prudent.

With a no-change decision widely anticipated, more interest will be focused on the tone of the Monetary Policy Statement and the accompanying forecasts. Over the past few months, prices for key export commodities have continued to decline, impacting incomes. At the same time, business and consumer sentiment have softened, as has the housing market – all suggesting that higher interest rates are already restraining activity.

While the RBNZ’s forecasts may be a little softer that those published in June, they will almost certainly be more hawkish than current market pricing. In June, the RBNZ’s forecasts implied an OCR of around 4.5% at end-2015, whereas market pricing has now fallen to imply an OCR of only around 3.75% by that point.

We remain optimistic about New Zealand’s growth prospects. Even though indicators have moderated a little recently, they remain at healthy levels overall and we still expect the economy to grow by +3.5% over 2014 and +3.0% over 2015. With growth continuing to exceed potential, the economy’s spare capacity will likely diminish further and more inflationary pressure is expected to be generated.

The key judgment for the RBNZ is just how much inflation will be generated and when. So far, despite strong economic growth, inflation has been well-contained. The same is true of wages and forward-looking indicators of firms’ pricing intentions. With the inflation outlook still benign, the RBNZ has time on its side. We now expect it to remain on hold for the rest of 2014, before resuming a hiking stance in early 2015.

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Tourism: China Southern Airlines To Fly To Christchurch

China Southern Airlines, in partnership with Christchurch Airport and the South Island tourism industry, has announced today it will begin flying directly between Guangzhou, Mainland China and the South Island. More>>

ALSO:

Dodgy: Truck Shops Come Under Scrutiny

Mobile traders, or truck shops, target poorer communities, particularly in Auckland, with non-compliant contracts, steep prices and often lower-quality goods than can be bought at ordinary shops, a Commerce Commission investigation has found. More>>

ALSO:

Auckland Transport: Government, Council Agree On Funding Approach

The government and Auckland Council have reached a detente over transport funding, establishing a one-year, collaborative timetable for decisions on funding for the city's transport infrastructure growth in the next 30 years after the government refused to fund the $2 billion of short and medium-term plans outlined in Auckland's draft Unitary Plan. More>>

ALSO:

Bullish On China Shock: Slumping Equities, Commodities May Continue, But Not A GFC

The biggest selloff in stock markets in at least four years, slumping commodity prices and a surge in Wall Street's fear gauge don't mean the world economy is heading for another global financial crisis, fund managers say. More>>

ALSO:

Real Estate: Investors Driving Up Auckland Housing Risk - RBNZ

The growing presence of investors in Auckland's property market is increasing the risks, and is likely to both amplify the housing cycle and worsen the potential damage from a downturn both to the financial system and the broader economy, said Reserve Bank deputy governor Grant Spencer. More>>

ALSO:

Annual Record: Overseas Visitors Hit 3 Million Milestone

Visitor arrivals to New Zealand surpassed 3 million for the first time in the July 2015 year, Statistics New Zealand said today. The record-breaking 3,002,982 visitors this year was 7 percent higher than the July 2014 year. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news