NZDUSD: Stay long. RBNZ will keep rates on hold for some time
The Reserve Bank of New Zealand said that its main interest rate is likely to remain at its current level for some time, though there were signs that super-easy policies globally were finally turning the corner. RBNZ governor Graeme Wheeler said in a speech published on the bank's website that its official cash rate projections were still "highly conditional" on assumptions around the exchange rate, migration and house price inflation.
The central bank cut its main rate in November to a record low of 1.75% in an attempt to boost tepid inflation and signalled that it would not be reducing it further.
The bank said the low point for CPI inflation had probably past and, helped by the improvement in global commodity prices, the bank expected December data to show that annual inflation was back within its target range of 1 to 3%. Wheeler noted the bank's stimulus efforts had been hampered by the extreme policy easings seen across the developed world, which had kept the New Zealand dollar uncomfortably high.
Wheeler added that the recent powerful earthquake in Kaikoura was expected to deliver a burst in construction activity and add to costs in the sector, but had not changed the outlook for steady policy.
The NZD was the biggest gainer among major currencies on Thursday. Our NZD/USD outlook remains bullish.
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The central bank cut its main rate in November to a record low of 1.75% in an attempt to boost tepid inflation and signalled that it would not be reducing it further.
The bank said the low point for CPI inflation had probably past and, helped by the improvement in global commodity prices, the bank expected December data to show that annual inflation was back within its target range of 1 to 3%. Wheeler noted the bank's stimulus efforts had been hampered by the extreme policy easings seen across the developed world, which had kept the New Zealand dollar uncomfortably high.
Wheeler added that the recent powerful earthquake in Kaikoura was expected to deliver a burst in construction activity and add to costs in the sector, but had not changed the outlook for steady policy.
The NZD was the biggest gainer among major currencies on Thursday. Our NZD/USD outlook remains bullish.
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