RBNZ’s Hawksby: We had more confidence that employment was at its maximum sustainable level

Anil Panchal FXStreet

RBNZ Assistant Governor Christian Hawkesby crossed wires, via Reuters, during early Tuesday. The Reserve Bank of New Zealand’s (RBNZ) senior official conveyed the RBNZ confidence over employment and inflation during the latest monetary policy meeting while speaking on the title “A least regrets approach to uncertainty”

Key quotes

Early discovery of vaccines against covid-19 has supported a stronger-than-expected recovery in the global economy.

August monetary policy statement noted we had more confidence that employment was at its maximum sustainable level.

Demand for our goods exports has fared much better than during previous global downturns.

Also benefited from a robust recovery in the chinese economy, our largest trading partner.

Monetary and government spending policies have supported a strong recovery in spending.

Government’s wage subsidy scheme is a policy that has been particularly effective in supporting the wider recovery.

Business investment has also picked up as the economy has recovered.

Looking ahead, we see the level of house prices as unsustainable relative to their fundamental drivers.

In August, committee agreed their ‘least regrets policy stance is to further reduce monetary stimulus to anchor inflation expectations’.

The disruption to the supply side of the economy has also been more prolonged than anticipated.

There have been significant disruptions to supply chains, particularly related to the shipping industry.

Given emergence of transmissible variants of covid-19, disruptions to movement of goods & people globally looks likely to continue over medium term.

Noted that monetary policy response would be required for future health lockdowns if there was more enduring impact on inflation, employment.

In a good position to navigate the period ahead, with the labour market operating at maximum sustainable employment.

Covid-19 has also made it more difficult for firms to source labour.

There has been tronger than expected domestic economy and associated improvement in job security.

The recovery phase has also seen house prices grow rapidly from already elevated levels.

Market implications

NZD/USD seesaws around 0.7030 following the news, fails to cheer cautiously optimistic comments from RBNZ policymaker amid sour sentiment.

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

AUD/USD edges higher as hot CPI inflation and hawkish RBA lift rate hike bets

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar edges higher against the US Dollar as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia rate hikes.

USD/JPY meets support near 157.00

USD/JPY retreats for the third consecutive day on Friday, revisiting the 157.00 region before attempting some recovery as investors continue to assess the latest BoJ meeting, where the central bank left rates unchanged, as widely anticipated.

Gold sinks to fresh yearly lows despite risk-off mood as Fed rate hike bets weigh

Gold slips to fresh year-to-date lows on Friday. The metal struggles despite a risk-off mood across markets, as expectations of further Federal Reserve (Fed) interest rate hikes continue to dominate price action, leaving Gold on track to end the month in negative territory.

Ripple Price Forecast: XRP bulls defend $1.20 as sell-side pressure triggers liquidations

Ripple (XRP) trades around $1.25 on Friday, rising from a short-term support level established at $1.20. This minor upward correction follows a sharp sell-off, triggered amid reports of a hack attack on the Binance exchange that impacted approximately $6.3 billion. The attack drove the broader crypto market on edge, as Binance suspended both deposits and withdrawals to contain the situation.

BoJ recap: A pause for now... but Japan has entered a new inflation phase

The Bank of Japan left its short-term policy rate unchanged at 1.25% but delivered a distinctly hawkish message on the risk of an inflation overshoot. The decision passed by 8-1, with board member Takata dissenting in favour of an increase to 1.5%, while Governor Kazuo Ueda stressed that the Bank would continue adjusting policy as needed.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.