11 Jun 2015
RBNZ: further cuts not expected in this cycle – ING
FXStreet (Barcelona) - With slowing inflation causing RBNZ to cut rates by 25bps, James Knightley, Senior Economist at ING, believes that the central bank might refrain from easing further in this cycle.
Key Quotes
“The Reserve Bank of New Zealand cut the official cash rate by 25bp to 3.25% to combat low inflation and the strength of the New Zealand dollar which in an environment of plunging commodity prices had severely dented overseas earnings. Wage inflation and inflation expectations were also viewed as being subdued.”
“Nonetheless, the economy remains in decent shape with growth of 3% likely this year while macroprudential tools are being used to try and cool the housing market. In fact these have been intensified in hot spots such as Auckland – the use of restrictions on mortgages over certain loan to values and income multiples. Moreover, looser monetary policy, high net immigration and ongoing strength in construction should support activity.”
“Consequently, while the RBNZ suggested that “further easing may be appropriate”, we don’t expect it in this cycle.”
Key Quotes
“The Reserve Bank of New Zealand cut the official cash rate by 25bp to 3.25% to combat low inflation and the strength of the New Zealand dollar which in an environment of plunging commodity prices had severely dented overseas earnings. Wage inflation and inflation expectations were also viewed as being subdued.”
“Nonetheless, the economy remains in decent shape with growth of 3% likely this year while macroprudential tools are being used to try and cool the housing market. In fact these have been intensified in hot spots such as Auckland – the use of restrictions on mortgages over certain loan to values and income multiples. Moreover, looser monetary policy, high net immigration and ongoing strength in construction should support activity.”
“Consequently, while the RBNZ suggested that “further easing may be appropriate”, we don’t expect it in this cycle.”