RBNZ: Risks are dovish, negative rates on cards? – Citibank

Analysts at Citigroup offer a sneak peek at what to expect from Wednesday’s Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, which will be followed by Governor Adrian Orr’s press conference.

Key quotes

“RBNZ ... policy will be left unchanged but risks are dovish.

Activity data since the last forecast in May has recovered sufficiently to justify an upward revision to growth forecasts.

However, of greater focus for markets will be the RBNZ's review of its monetary policy tools -especially around the potential to adjust the LSAP (currently NZD60bn), purchasing foreign assets or implementing negative interest rate policy

Seasonality shows that there is more risk avoidance in August than in other months, and in the G10 currency space NZD tends to fall in line with AUD

This is an anomaly, and we see no clear reason for this type of seasonality. However, with a general election due in September, if the market environment this year changes to risk-off again, the probability that NZD will depreciate over the next month, even if only temporarily, is likely to get higher.”