As expected, the Reserve Bank of New Zealand, left its key interest rate unchanged at 1.50%. According to the NAB FX Strategy Team, the central bank remained dovish, “but not aggressively so.”
Key Quotes:
“We believe the RBNZ has done the right thing today, in buying some time to see how the downside risks play out, or are perhaps arrested to a meaningful extent.”
“The markets certainly took today’s RBNZ missive in its stride. There was an increase in NZD and wholesale rates, but only in smalls. While there was a sense that the Bank might sound very dovish, even cut, today there was a wider impression that it would want to take stock, after its rate cut in May. The latter was manifest in every polled analyst expecting the Committee to hold at 1.50% today, the former in market pricing.”
“Market pricing has slivered down to about 78% odds of a 25 basis point cut at the 7 August MPS. This is broadly in line with our thinking. We remain of the view of another cut in August. But we also reiterate the potential for the next run of economic data to have a strong sway – one way or another. The indicators have deteriorated. Will the
hard data reinforce the message?”
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