RBNZ Minutes: Economy is experiencing pockets of both labor shortages and employment slack

Dhwani Mehta FXStreet

The Reserve Bank of New Zealand’s (RBNZ) May meeting’s minutes reveals that the board members remain concerned about the country’s labor market.

Key takeaways

Economic activity in New Zealand has returned to close to its pre-COVID-19 level.

Medium-term outlook for growth remains similar to the scenario presented in the February statement.

Committee agreed on the need for caution as domestic activity remains uneven across sectors of the economy.

Economy is experiencing pockets of both labour shortages and employment slack.

Current level of employment remains below their estimates of the maximum sustainable level but expect it to converge to that level over time.

Expect to see wage growth lift as firms compete for labor.

The Committee noted that on current projections the OCR eventually increases over the medium term, but agreed that this is conditional on the economic outlook evolving broadly as anticipated.

Weekly changes in the LSAP purchases do not represent a change in monetary policy stance

Risks to medium-term inflation were mitigated by ongoing global spare capacity and well-anchored inflation expectations.

LSAP programme could not reach the $100bn limit by June 2022.

Members reinforced their preference to maintain the current level of monetary stimulus until they were confident that the inflation and employment objectives would be met

Agreed this would require considerable time and patience.

Related reads

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold bounces to $4,350; focus on the Fed

Gold sets aside two daily declines in a row, gathering some composure and revisiting the $4,350 zone per troy ounce amid decent gains midweek. The precious metal’s recovery comes despite an acceptable advance in the US Dollar and declining US Treasuty yields prior to the anticipated rate hike by the Fed.

XRP Price Forecast: XRP clings to 50-day EMA support after CLARITY Act setback

Ripple (XRP) trades lower around $1.28 on Wednesday, as investors broadly assess the impact of the failed United States (US) Senate vote on the CLARITY Act and the upcoming Federal Reserve (Fed) monetary decision. The remittance token has trimmed early-week gains that tagged highs around $1.50 on Monday and now holds key moving-average support.

Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.