RBNZ kept rates on hold this time – UOB

Economist at UOB Group Lee Sue Ann reviewed the recent decision by the RBNZ to keep the OCR unchanged at 1.00%.

Key Quotes

“At its last monetary policy meeting for the year, the Reserve Bank of New Zealand (RBNZ) decided to keep its official cash rate (OCR) unchanged at 1.00%”.

“We had held onto the minority view that the RBNZ will maintain its OCR going into this meeting, and this was largely because we believed the bigger-than-expected 50bps rate cut back in August was pre-emptive in nature, and the RBNZ would have liked to be on a “wait-and-see” approach to assess the impact of the cumulative 75bps rate cuts (year-to-date) on the economy. Furthermore, the NZD has tumbled more than 8% from its 2019-high of 0.6942”.

“The next RBNZ meeting is not until 12 February 2020. Our current OCR forecast of 1.00% through 2020 remains intact. That said, we will remain watchful of both developments at home and abroad. Should employment growth weaken further, households get spooked, and/or the global economy deteriorates, it will not be surprising to see the RBNZ venturing into further interest rate cuts and the uncharted territory of unconventional monetary policy, as stated in the post-decision press conference by RBNZ Governor Adrian Orr. He did, however, flag that there is no urgency to act and to use unconventional tools for now”.