• The Reserve Bank of New Zealand (RBNZ) is expected to stay pat on the Official Cash Rate (OCR) in June as no key data changed much since its May meeting.
  • With Governor Orr at the helm, the RBNZ is likely to change the wording of the policy statement, but keep the main message of being data-dependent and risk-aware in place.
  • With inflation decelerating at the lower boundary of the targeted range, the underlying dovish tone of the monetary policy statement is set to prevail.

The Reserve Bank of New Zealand (RBNZ) is expected to keep the Official Cash Rate (OCR) unchanged in June based on the outlook for more gradual inflation and GDP increase compared to previous estimates.

With quarterly inflation at 1.1% in March quarter, just one-tenth of a percent above the targeted range of 1%-3% and the outlook for inflation muted in the current environment, the RBNZ is expected to voice the data dependency before it indicates any changes to the current setup of the OCR.

With new RBNZ Governor Adrian Orr the monetary policy statement was enriched by the new form of solid uncertainty pointing to data dependence with RBNZ saying: ”The direction of our next move is equally balanced, up or down. Only time and events will tell.” 

I believe the RBNZ statement will change in wording, but not the meaning of the message from the policymakers that the data dependency is still in place with great risks in the form of trade wars appearing on the horizon.

That would first mean that the outlook for inflation would turn into more gradual inflation increase and that would translate to even longer period of interest rate stability in New Zealand. With markets pricing in the August 2019 as the most probable time of the next OCR increase, inflation lower for longer would mean a shift in expectations of a rate hike towards November 2019. 

The wage growth is not present yet to generate enough of price pressures for inflation to pick up higher and faster than estimated to see the horizon of the next rate increase sooner. 

The RBNZ is likely to voice risks stemming from recent trade-related pressures. Although implications of trade wars for New Zealand are not yet clear, the benefits from a global free trade for a small and open economy like the one of New Zealand clearly overweigh the risks. Therefore the impact of trade wars escalating would be profound for New Zealand, especially if China was to slow down significantly. 

Inflation in New Zealand

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD loses 1.21 as the dollar extends its gains

EUR/USD has dipped below 1.21, some 70 pips down on the day as the dollar recovers alongside Treasury yields. US Consumer Sentiment beat estimates with 86.4 points. 

EUR/USD News

GBP/USD retreats amid UK GDP miss, reopening concerns

GBP/USD is hovering around 1.4150, down on the day. UK GDP missed with 2.3% in April and a four-week delay to Britain's reopening is speculated. The greenback is gaining some ground.

GBP/USD News

XAU/USD drops back below $1900, as US dollar rebounds ahead of data

Gold price has retraced below the $1900 mark once again, having tested Tuesday’s high near $1903. The latest leg down in gold price comes on the back of a tepid bounce staged by the US dollar, as the Treasury yields trim losses across the curve.

Gold News

Ethereum price prepares for a bullish weekend, targeting $3,000

Ethereum price seems prime to revisit $3,000. Although ETH faces resistance at $2,300, the upswing seems imminent. A downswing below $2,000 could invalidate the bullish thesis. 

Read more

Hot Inflation is warming the seat for the June FOMC

Americans are seeing the fastest price increases since their seventh-graders were born as inflation builds into the US economy from the disruptions of the pandemic lockdowns. Core CPI at 3.8% is the steepest gain in 29 years.

Read more

Majors

Cryptocurrencies

Signatures