27 Jan 2015
RBNZ Preview: Remaining on hold - Nomura
FXStreet (Bali) - According to Charles St-Arnaud, Economist at Nomura, a robust domestic economy and weaker NZD means little changes to RBNZ policy stance.
Key Quotes
"We believe the RBNZ statement will continue to show that the central bank remains confident in the economic outlook, especially in the light of recent data. However, this will probably contrast with the RBNZ, which is likely to continue to express concerns that the global economy, with the exception of the US economy, continues to soften. The further decline in oil prices since the December meeting is likely to be viewed as a positive for the economy, but also means the central bank is likely to expect inflation to remain weak and even moderate further."
"With NZD depreciating sharply on a TWI basis over the last week (3.4% since 16 January) and at its lowest level against the USD since 2011, the RBNZ is unlikely to reiterate its view that “the exchange rate does not reflect the decline in export prices this year and remains unjustifiably and unsustainably high. We expect to see a further significant depreciation.” This is despite the fact that, as we have shown in FX Insights - FX forecast: Updating the commodity currencies incorporating the oil price drop, the terms of trade have improved in recent months, thanks to the sharp decline in oil prices. Our view remains that the RBNZ will keep rates unchanged until 2016."
Key Quotes
"We believe the RBNZ statement will continue to show that the central bank remains confident in the economic outlook, especially in the light of recent data. However, this will probably contrast with the RBNZ, which is likely to continue to express concerns that the global economy, with the exception of the US economy, continues to soften. The further decline in oil prices since the December meeting is likely to be viewed as a positive for the economy, but also means the central bank is likely to expect inflation to remain weak and even moderate further."
"With NZD depreciating sharply on a TWI basis over the last week (3.4% since 16 January) and at its lowest level against the USD since 2011, the RBNZ is unlikely to reiterate its view that “the exchange rate does not reflect the decline in export prices this year and remains unjustifiably and unsustainably high. We expect to see a further significant depreciation.” This is despite the fact that, as we have shown in FX Insights - FX forecast: Updating the commodity currencies incorporating the oil price drop, the terms of trade have improved in recent months, thanks to the sharp decline in oil prices. Our view remains that the RBNZ will keep rates unchanged until 2016."