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NZD: RBNZ getting nervous about cutting rates - BNZ

FXStreet (Delhi) – Stephen Toplis, Head of Research at BNZ, notes that the RBNZ has finally admitted that it is getting really nervous about cutting interest rates much further.

Key Quotes

“The crux of the argument, that we share, is that further rate cuts must be constrained by the fact that (a) there is little evidence that reducing rates further will boost growth and, in turn, inflation and (b) further rate cuts risk pouring more fuel on an already blazing housing market.”

“Importantly, the RBNZ also reaffirmed its September MPS news that it is becoming more relaxed about getting CPI inflation within the target band and less focused on hitting the 2.0% mid-point.”

“The combination of the above factors is critically important because it means the hurdle for further interest rate cuts has just got higher. This is not to say the Reserve Bank is likely to pause with a cash rate of 2.75%. To the contrary, the Governor also confirmed that further easing is still likely but he does suggest there will be a pause at 2.5% unless economic activity indicators deteriorate significantly in the interim.”

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