RBNZ: Spencer’s steady hand...for now - TDS

Analysts at TDS note that the RBNZ left the official cash rate (OCR) at 1.75% as widely anticipated.

Key Quotes

“The two key statements (1) “A lower NZD is needed to increase tradables inflation and help deliver more balanced growth”; and (2) policy guidance “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly” were left unchanged as we expected.”

“The markets saw a slight dovish tilt (or absence of a hawkish tilt) where NZD briefly eased to $US0.72 while 2yr swaps a pip lower at 2.21%. OIS pricing already eased after the surprise dovish Poloz speech, where 1yr is priced for one +25bp hike. AUDNZD jumped to 1.09.”

“The dovish tilt was the removal of "strong" in front of "population growth" (p2). This accommodates ‘kingmaker’ Winston Peters of NZ First as his key platform is sharply reducing immigration growth. Perhaps migration data reports are the new tier 1 indicator, next update Oct 20, last +72k pa (long run average +11k).”

“We see this OCR Review is as neutral as it gets for the RBNZ, then we expect a post-election-result shift towards a more hawkish message from Governor Spencer, an out of consensus view, by the 9 November MPS.”