RBNZ: Few surprises offered – Deutsche Bank

New Zealand's August Monetary Policy Statement offered few surprises, with the OCR remaining unchanged and the published forward projections for the OCR exactly as they were in the May MPS, explains the analysis team at Deutsche Bank.

Key Quotes

“We note however more forceful rhetoric around the currency (a decline "is needed"), while downward revisions to the projections for headline inflation look largely to reflect base effects stemming from a lower-than-expected Q2-17 CPI.”

“As far as our RBNZ view is concerned, weakness across price and wage measures in Q2-17 has shifted the balance of risks towards a later start to the hiking cycle than our current forecast of the first hike coming in February 2018. The RBNZ's unchanged policy stance in the August MPS does little to shift this balance. Still, and as we have stated before, the evolution of inflation through the second half of the year will be critical to our view: we continue to think that a ramp up in nontradables inflation, reflecting underlying strength in the domestic economy, could see stronger inflation outturns through H2-17 than the RBNZ currently expects.”