23 Mar 2015
RBNZ to keep OCR on hold until September 2016 – Westpac
FXStreet (Barcelona) - According to the Research Team at Westpac, RBNZ might keep the OCR on hold until September 2016 as inflation is projected to remain below the central bank’s target.
Key Quotes
“….. the global economy remains sluggish and global inflation is virtually non-existent. Consequently, more than 20 central banks have eased monetary policy recently. These conditions look set to persist for a while yet.”
“For New Zealand, this is going to mean limited imported inflation and sustained upward pressure on the exchange rate vis-à-vis the Australian dollar, the euro, and the yen.”
“What’s more, global oil prices have remained low. And after carefully considering the likely state of supply and demand in the market, we have adopted a forecast of only gradually rising oil prices over the coming two years.”
“All of this is going to provide a brake on inflation in New Zealand for some time. We expect that inflation will remain below the RBNZ’s target band through 2015, and below the 2% target mid-point until mid-2017. This will result in a full five years of sub-2% inflation.”
“We’ve noted before that the RBNZ won’t be lifting the OCR while inflation is below 1%, and that it will want to be confident that underlying inflation pressures have materially lifted before it seriously considers hikes. It now looks likely that this will take longer than previously assumed.”
“Consequently, we now expect that the RBNZ will keep the OCR on hold until September 2016.”
“Furthermore, the eventual hiking cycle is expected to be more muted than previously assumed, with only two hikes expected in September and December 2016, taking the OCR to a stunted peak of only 4% (previously we expected a series of four hikes starting in June 2016).”
Key Quotes
“….. the global economy remains sluggish and global inflation is virtually non-existent. Consequently, more than 20 central banks have eased monetary policy recently. These conditions look set to persist for a while yet.”
“For New Zealand, this is going to mean limited imported inflation and sustained upward pressure on the exchange rate vis-à-vis the Australian dollar, the euro, and the yen.”
“What’s more, global oil prices have remained low. And after carefully considering the likely state of supply and demand in the market, we have adopted a forecast of only gradually rising oil prices over the coming two years.”
“All of this is going to provide a brake on inflation in New Zealand for some time. We expect that inflation will remain below the RBNZ’s target band through 2015, and below the 2% target mid-point until mid-2017. This will result in a full five years of sub-2% inflation.”
“We’ve noted before that the RBNZ won’t be lifting the OCR while inflation is below 1%, and that it will want to be confident that underlying inflation pressures have materially lifted before it seriously considers hikes. It now looks likely that this will take longer than previously assumed.”
“Consequently, we now expect that the RBNZ will keep the OCR on hold until September 2016.”
“Furthermore, the eventual hiking cycle is expected to be more muted than previously assumed, with only two hikes expected in September and December 2016, taking the OCR to a stunted peak of only 4% (previously we expected a series of four hikes starting in June 2016).”