Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 


Another hike delivered, with more to come

RBNZ Observer Update: Another hike delivered, with more to come

The RBNZ increased its cash rate by +25bp to 3.00% today, as expected. The economy is picking up strongly and the RBNZ has continued on a path to return rates to more normal levels, to keep inflation contained. The central bank kept the prospect of further rate hikes at coming meetings open, however, the statement expressed increased concern over the high NZD. Overall, with demand continuing to rise strongly, we expect the central bank to hike rates further in 2014, with a 25bp increase at the June meeting likely. However, a strengthening exchange rate may mean slightly fewer hikes than the market is currently pricing.

Facts
- The RBNZ increased its cash rate by 25bp to 3.00%, as expected by all 15 surveyed analysts (including HSBC).

- On the outlook for policy, the RBNZ noted ‘the speed and extent to which the OCR will be raised will depend on economic data and our continuing assessment of emerging inflationary pressures, including the extent to which the high exchange rate leads to lower inflationary pressure’.

- On the economy, the RBNZ stated ‘New Zealand’s economic expansion has considerable momentum’.

- On the NZD, the RBNZ noted that ‘the Bank does not believe the current level of the exchange rate is sustainable’.

Implications
The RBNZ continued on a path of returning interest rates to more normal levels, by raising its cash rate by 25 basis points to 3.00%. The New Zealand economy continues to pick up strongly, supported by post-earthquake reconstruction, rising house prices, increased consumer spending and strong migrant inflows. With demand rising and the economy already at capacity, the RBNZ needs to move gradually away from current loose monetary settings to keep inflation in check.

Today’s statement from the central bank suggested that this process is likely to continue at upcoming meetings. The central bank noted ‘the speed and extent to which the OCR will be raised will depend on economic data and our continuing assessment of emerging inflationary pressures, including the extent to which the high exchange rate leads to lower inflationary pressure’. With the economy on track to post one of the strongest growth rates in the OECD this year, we expect the central bank to follow up with a further 25bp hike at the June meeting.

However, a couple of factors may hold back the extent of further rate hikes in 2014 (the market is currently pricing another 60bps before year-end). First, the RBNZ remain concerned about the high NZD, explicitly noting its strength in today's policy statement. The NZD TWI is now +2.5% above their March projections. Second, the pace of decline in dairy prices is also likely to have surprised the central bank. In March, RBNZ projections implied a 3.75% cash rate by year-end. We expect the stronger NZD and drop in export prices to limit the increase to 3.50%.

Bottom line
The RBNZ increased its cash rate to 3.00%, as expected.

With demand continuing to pick-up strongly in New Zealand, we expect further hikes in 2014 with a 25bp increase at the June meeting likely.

However, the elevated exchange rate and the recent fall in export prices may mean slightly fewer hikes this year than the market is currently pricing.

http://img.scoop.co.nz/media/pdfs/1404/HSBC_Research_RBNZ_Observer_Update__Another_hike_delivered_with_more_to_come_2014.04.24.pdf.zip
Ends

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Digital Evolution: Scoop Independent News Launches "Operation Chrysalis"

From today Scoop is beginning a process of public consultation with the political, business and civil society groups it has served for the past 15 and a half years.

"It is hoped that in time - with new leadership and increased community engagement - the chrysalis will incubate a new kind of Scoop, one which can sustainably continue Scoop's Mission 'to be an agent of positive change'", says Scoop Founder, Editor and Publisher Alastair Thompson.

"As big publishing shrivels, public participation in contributing and spreading news has grown. Scoop has evolved with this wave by providing an independent platform, committed to upholding democracy, providing a voice to all, and providing the public easy access to information about decisions which affect them." More>>

 

Parliament Adjourns:

Greens: CAA Airport Door Report Conflicts With Brownlee’s Claims

The heavily redacted report into the incident shows conflicting versions of events as told by Gerry Brownlee and the Christchurch airport security staff. The report disputes Brownlee’s claim that he was allowed through, and states that he instead pushed his way through. More>>

ALSO:

TAIC: Final Report On Grounding Of MV Rena

Factors that directly contributed to the grounding included the crew:
- not following standard good practice for planning and executing the voyage
- not following standard good practice for navigation watchkeeping
- not following standard good practice when taking over control of the ship. More>>

ALSO:

Gordon Campbell:
On The Pakistan Schoolchildren Killings

The slaughter of the children in Pakistan is incomprehensibly awful. On the side, it has thrown a spotlight onto something that’s become a pop cultural meme. Fans of the Homeland TV series will be well aware of the collusion between sections of the Pakistan military/security establishment on one hand and sections of the Taliban of the other… More>>

ALSO:

Werewolf Satire:
The Politician’s Song

am a perfect picture of the modern politic-i-an:
I don’t precisely have a plan so much as an ambition;
‘Say what will sound most pleasant to the public’ is my main dictum:
And when in doubt attack someone who already is a victim More>>

ALSO:

Flight: Review Into Phillip Smith’s Escape Submitted To Government

The review follows an earlier operational review by the Department of Corrections and interim measures put in place by the Department shortly after prisoner Smith’s escape, and will inform the Government Inquiry currently underway. More>>

ALSO:

Intelligence: Inspector-General Accepts Apology For Leak Of Report

The Inspector-General of Intelligence and Security, Cheryl Gwyn, has accepted an unreserved apology from Hon Phil Goff MP for disclosing some of the contents of her recent Report into the Release of Information by the NZSIS in July and August 2011 to media prior to its publication. The Inspector-General will not take the matter any further. More>>

ALSO:

Drink: Alcohol Advertising Report Released

The report of the Ministerial Forum on Alcohol Advertising and Sponsorship has been released today, with Ministers noting that further work will be required on the feasibility and impact of the proposals. More>>

ALSO:

Other Report:

Leaked Cabinet Papers: Treasury Calls For Health Cuts

Leaked Cabinet papers that show that Government has been advised to cut the health budget by around $200 million is ringing alarm bells throughout the nursing and midwifery community. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news