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

 

RBNZ rate hike expectations pared back on US downgrade

RBNZ rate hike expectations pared back on US downgrade

By Paul McBeth

Aug. 8 (BusinessDesk) – Markets aren’t so sure Reserve Bank Governor Alan Bollard will deliver a rate hike in September after the U.S. credit rating downgrade capped off a week of turbulence in financial markets.

Traders pared their bets Bollard on increases to the official cash rate to just 45 basis points over the coming 12 months, according to the Overnight Index Swap curve. That’s down from more than 100 basis points two weeks ago when he said there was “little need” to keep the stimulus from his 50 basis point cut in March, as he tried to shore up flagging business confidence in the wake of Canterbury’s February earthquake.

“Global financial markets’ volatility needed to be reduced before he would remove the emergency cut – that hasn’t happened,” said Robin Clements, economist at UBS New Zealand. Rate hike expectations are “wavering,” though it’s a “little premature to be hedging around this far out from September.”

The seven-year swap rate dropped 23 basis points to an 11-month low 4.505% after the after Standard & Poor’s cut the U.S. rating a notch to AA+, while two-year swap rates fell 31 basis points to 3.26%.

That came at the end of last week when the European Central Bank committed to buying Spanish and Italian debt, Japan’s central bank intervened in foreign exchange markets and stocks on Wall Street reported their biggest daily sell-off since 2008.

A spokesman for the Reserve Bank said the central bank was watching the global situation, but had not further comment.

New Zealand’s faster than expected economic recovery and surging prices for locally produced materials underpinned Bollard’s hint that a rate hike from 2.5% was imminent. That was supported by solid employment data last week, and slightly weaker wage data, which eased some underlying inflationary fears.

“The thing is, on the domestic side it’s still looking pretty good. It may well be that’s what carries the day,” Clements said. “We’ve still got very, very low rates.”

Clements says the turbulence may be a “blessing in disguise” for exporters who have been dealing with an excessively high New Zealand dollar. The kiwi recently traded at 83.46 U.S. cents, down from 84.43 cents at the end of trading in New York on Friday.

“It’s created a riskier environment, and risk-off trades will dominate. That’s not good for commodity currencies, it’s not good for the Aussie and kiwi, having gone to such punishing levels,” he said.

(BusinessDesk)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 



Consumer NZ: Buy-now, Pay-later Raking In $10m+ In Late Fees Annually

A Consumer NZ survey has found buy-now, pay-later services are costing shoppers more than $10 million a year in late fees. Close to four out of 10 Kiwi consumers use buy-now, pay-later services, such as Afterpay, Laybuy and Zip... More>>

Westpac: Catherine Mcgrath Appointed New Zealand CEO

Westpac Group CEO Peter King and the Westpac New Zealand Board today announced the appointment of Catherine McGrath as Chief Executive Officer, Westpac New Zealand... More>>


Amazon: AWS To Open Data Centres In New Zealand

Today, Amazon Web Services (AWS), announced plans to open an infrastructure region in Aotearoa New Zealand in 2024. The new AWS Asia Pacific (Auckland) Region will consist of three Availability Zones (AZs) and join the existing 81 Availability Zones across 25 geographic AWS Regions at launch... More>>

ALSO:



Statistics: Surge In Imports Results In Record Monthly Trade Deficit
Imports increased $1.8 billion in August 2021 compared with August 2020, resulting in a record monthly trade deficit of $2.1 billion, Stats NZ said today. Exports were little changed, down $42 million. "This is a larger deficit than normal because of higher values for imports.. More>>

Fonterra: Completes reset, announces annual results and long-term growth plan out to 2030

Fonterra Co-operative Group Limited today announced a strong set of results for the 2021 financial year, reflected in a final Farmgate Milk Price of $7.54, normalised earnings per share of 34 cents and a final dividend of 15 cents... More>>


Statistics: GDP rises in the June 2021 quarter

Gross domestic product (GDP) rose by 2.8 percent in the June 2021 quarter, following a 1.4 percent increase in the March 2021 quarter, Stats NZ said today. June 2021 quarter GDP was 4.3 percent higher when compared with the December 2019 quarter... More>>