Data dependent RBNZ leaves Official Cash Rate (OCR) at 1.75%


The RBNZ has left the Official Cash Rate (OCR) at 1.75% and says expects to keep the OCR at this level through 2019 and into 2020.
RBNZ says there are both upside and downside risks to our growth and inflation projections.

  • Expects to keep the OCR at this level through 2019 and into 2020.
  • There are both upside and downside risks to our growth and inflation projections.
  • Timing and direction of any future OCR move remain data dependent.
  • Pick up in GDP growth in Q2 was party due to temporary factors, biz survey continues to suggest growth will be soft in near term.
  • Says employment is around max sustainable level.
  • Says level of New Zealand dollar will support export earnings.
  • Says CPI inflation remains below 2 pct midpoint, necessitating continued supportive monetary policy.
  • Says GDP growth is expected to pick up over 2019.

For today's meeting, analysts at TD Securities outlined some key comments and potential tweaks to look out for in this statement: 

Checklist for the Monetary Policy Statement:

  • REPEAT: “The direction of our next OCR move could be up or down.” Removing this will be too hawkish too soon and NZD and swap rates will jump beyond comfort levels for the RBNZ.
  • REPEAT: “intends to keep the OCR at an expansionary level for a considerable period.” Should drop the reference to "and into 2020" given the string of upside surprises to growth, labour market strength and inflation.
  • TWEAK: OCR increase brought forward by six months to reflect the higher inflation profile. Not doing so erodes RBNZ credibility.
  • REPEAT: From the September OCR Review, where core inflation and GDP were stronger than expected but "downside risks remain". DROP: the August downside growth scenario where the OCR could be cut by up to -100bp if growth disappoints. Growth has not only not disappointed but Q3 looks like another strong print (our tracking is for another +1.2%/q for GDP(E)).
  • REPEAT: the upside inflation scenario where the OCR could be +50bp higher than the base case.

About the RBNZ interest decision and statement

The RBNZ interest rate decision is announced by the Reserve Bank of New Zealand. If the RBNZ is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the NZD. The RBNZ rate statement contains the explanations of their decision on interest rates and commentary about the economic conditions that influenced their decision.

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