Let me make this clear

The tone of last week's Reserve Bank policy statement was a little more dovish than their last missive. However, rather than reflecting any change in stance, the details of the September press statement help to cement what the RBNZ's position is: it expects to keep the OCR on hold for an extended period, but the risks are tilted to the downside. The RBNZ is especially conscious of the downside risks for activity, and on that front the latest round of confidence surveys still points to some clouds on the economic horizon.

September's Official Cash Rate review was a ‘no surprises' affair. The Reserve Bank left the OCR unchanged at 1.75%. They also repeated the key guidance phrases from the previous policy statement, noting that:

1) they "expect to keep the OCR at this level [1.75%] through 2019 and into 2020";

2) the next move could be "up or down";

3) and that they "expect to keep the OCR at an expansionary level for a considerable period...". All of that was as expected, and as a result we saw very little reaction in either interest rate or exchange rate markets following the announcement.

What was more telling was the accompanying press release which provided an explicit description of the RBNZ's policy stance. In particular, the RBNZ stated that while it expects to keep the cash rate on hold for an extended period, that is dependent on the pace of growth picking up over the coming year. They went on to note that, although June quarter GDP growth was stronger than expected (up +1% vs. the RBNZ's forecast of +0.5%), they still see the risks for growth as being to the downside.

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