WELLINGTON, Jan 28 (Reuters) - New Zealand's central bank
left its official cash rate unchanged at a record low 2.5 percent
on Thursday and reiterated that a start to raising rates was
likely around the middle of the year.
It was the sixth consecutive review in which the RBNZ has held rates steady.
All 20 economists in a Reuters poll had picked no change to the rate.
****************************************************************
KEY POINTS:
- RBNZ says expects to begin removing stimulus around mid-2010
- RBNZ says outlook still consistent with December projections
- RBNZ sees inflation tracking comfortably within band
- Click on for official text.
COMMENTARY: ROBIN CLEMENTS, SENIOR ECONOMIST, UBS
'In terms of what they've written, it looks much like the December statement, with the recognition of improvement couched in caution and uncertainty.'
'The bottom line is they're still pointing to the middle of 2010. The only hint, perhaps, that things could be a little bit more immediate is that the sentence which pointed to tightening of financial conditions reducing the need for immediate action is no longer there.'
HELEN KEVANS, ECONOMIST, JPMORGAN
'We'll see a move in the cash rate before mid-2010, mainly because of the recovery seen in the housing market and the medium term inflation outlook. We'll probably see the first move in April. It will be the start of the tightening cycle.'
MARKET REACTION:
The New Zealand dollar initially gained around 10 points but then eased a touch to settle around $0.7035/45 from $0.7045/55 before the statement. Implied yields on bill futures were also initally unmoved but then gained a basis point.
LINKS:
- The Reserve Bank of NZ Web site is: www.rbnz.govt.nz
- For all New Zealand news and data, 3000 Xtra users can click on
BACKGROUND:
- The latest Reuters poll has four of 20 analysts favouring a rate rise in March, and the remainder in the second quarter with a nine of those expecting April 28.
- Financial markets have priced in a 20 percent chance for the first rate rise in March but fully priced in an April rise, analysts say.
- Annual inflation rate was 2 percent in the fourth quarter, but consumer prices eased 0.2 percent in the three months to Dec. 31, exactly in line with the central bank's forecast. The RBNZ is required to keep headline inflation between 1-3 percent over the medium term.
- Recent data has also shown a slowly recovering housing market, higher retail sales, and improving consumer confidence, as the economy gradually emerges from recession.
- In December RBNZ governor Alan Bollard said a start to the tightening cycle would depend on the pace and makeup of economic recovery.
- Earlier the U.S. Federal Reserve rates near zero and repeated its vow to keep rates low for an extended period.
- Other central banks have mostly held their rates in recent reviews, although the Reserve Bank of Australia increased its rates three times at the end of 2009 to 3.75 percent. The U.S. Federal Reserve is at 0-0.25 percent, the European Central Bank at 1 percent, and the Bank of Japan at 0.1 percent.
- The next RBNZ rate review is on March 11.
((Wellington newsroom tel 64 4 471 4234, fax +64 4 4736 212, wellington.newsroom@reuters.com)) Keywords: NEWZEALAND ECONOMY/RATES (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
It was the sixth consecutive review in which the RBNZ has held rates steady.
All 20 economists in a Reuters poll had picked no change to the rate.
****************************************************************
KEY POINTS:
- RBNZ says expects to begin removing stimulus around mid-2010
- RBNZ says outlook still consistent with December projections
- RBNZ sees inflation tracking comfortably within band
- Click on for official text.
COMMENTARY: ROBIN CLEMENTS, SENIOR ECONOMIST, UBS
'In terms of what they've written, it looks much like the December statement, with the recognition of improvement couched in caution and uncertainty.'
'The bottom line is they're still pointing to the middle of 2010. The only hint, perhaps, that things could be a little bit more immediate is that the sentence which pointed to tightening of financial conditions reducing the need for immediate action is no longer there.'
HELEN KEVANS, ECONOMIST, JPMORGAN
'We'll see a move in the cash rate before mid-2010, mainly because of the recovery seen in the housing market and the medium term inflation outlook. We'll probably see the first move in April. It will be the start of the tightening cycle.'
MARKET REACTION:
The New Zealand dollar initially gained around 10 points but then eased a touch to settle around $0.7035/45 from $0.7045/55 before the statement. Implied yields on bill futures were also initally unmoved but then gained a basis point.
LINKS:
- The Reserve Bank of NZ Web site is: www.rbnz.govt.nz
- For all New Zealand news and data, 3000 Xtra users can click on
BACKGROUND:
- The latest Reuters poll has four of 20 analysts favouring a rate rise in March, and the remainder in the second quarter with a nine of those expecting April 28.
- Financial markets have priced in a 20 percent chance for the first rate rise in March but fully priced in an April rise, analysts say.
- Annual inflation rate was 2 percent in the fourth quarter, but consumer prices eased 0.2 percent in the three months to Dec. 31, exactly in line with the central bank's forecast. The RBNZ is required to keep headline inflation between 1-3 percent over the medium term.
- Recent data has also shown a slowly recovering housing market, higher retail sales, and improving consumer confidence, as the economy gradually emerges from recession.
- In December RBNZ governor Alan Bollard said a start to the tightening cycle would depend on the pace and makeup of economic recovery.
- Earlier the U.S. Federal Reserve rates near zero and repeated its vow to keep rates low for an extended period.
- Other central banks have mostly held their rates in recent reviews, although the Reserve Bank of Australia increased its rates three times at the end of 2009 to 3.75 percent. The U.S. Federal Reserve is at 0-0.25 percent, the European Central Bank at 1 percent, and the Bank of Japan at 0.1 percent.
- The next RBNZ rate review is on March 11.
((Wellington newsroom tel 64 4 471 4234, fax +64 4 4736 212, wellington.newsroom@reuters.com)) Keywords: NEWZEALAND ECONOMY/RATES (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.