WELLINGTON, April 29 (Reuters) - New Zealand's central bank
left its official cash rate steady at a record low 2.5 percent on
Thursday and replaced a pledge to keep it there until mid
year with a statement that rates will rise over the 'coming
months.'
It was the eighth consecutive review in which the RBNZ has held rates steady, and was expected by all 17 economists in a Reuters poll.
****************************************************************
KEY POINTS:
- RBNZ says expects to begin removing stimulus over the coming months, if economy recovers as forecast.
- RBNZ says higher bank funding costs reduce extent of future rate increases
- RBNZ expects economy to recover in line or slightly faster than forecast.
- RBNZ says export earnings stronger, but credit growth still subdued.
- RBNZ says risks to global outlook remains elevated, while trading partner activity has recovered faster than expected.
- Click on for official text.
COMMENTARY:
DARREN GIBBS, CHIEF ECONOMIST, DEUTSCHE BANK
'It's a little more upbeat than in March, when they were planning to hike in June and I think they are (still) more likely to hike in June given the contents of this statement.'
'I think it's pretty black and white, absent a complete meltdown in Europe, what we're seeing domestically and across the global economy is clearly stronger and that's being reflected in the RBNZ's more upbeat view.'
ADAM CARR, SENIOR ECONOMIST AT ICAP
'The decision is much in line with expectations, but I think they are being a bit cavalier in their approach to tightening policy. Inflation will surprise on the upside, and that to my mind will lead them to raise the cash rate by 50 basis points in the second half of the year. I stick to my forecast that they will start lifting rates by June, given the economic data and what is happening in Asia and Australia.'
CAMERON BAGRIE, CHIEF ECONOMIST, ANZ-NATIONAL BANK
'They've given themselves the ultimate flexibility, in terms of what the statement says. The 'coming months' to me says June or July but they've still got some conditionality around that and they're still expecting 1 percent per quarter growth.'
'That conditionality is a pretty high hurdle to meet.'
'At the moment I think September feels a little too late. When it comes to being a crap shoot versus June or July I'm a little more inclined to June at this stage.'
STEVEN WALTERS ECONOMIST, JPMORGAN
'We are still saying July and I think the language is still consistent with that. They've dropped the reference to mid-year and they're talking about the coming months and that gives them a bit more flexibility. They were locked in (with the mid-year reference) and this is more vague. It allows them more flexibility if things look a bit more sluggish.
'This is all about the global economy looking better. When they talk about the domestic economy, they are very cautious. On the domestic economy they are more dovish but they are more upbeat on the global economy. The disparity between the two is getting bigger. There is more growth offshore, less domestically.'
PHILIP BORKIN, ECONOMIST, GOLDMAN SACHS JBWERE
'It's still a reasonably balanced statement and the Reserve Bank is looking to maintain that level of flexibility around when the tightening cycle will begin.
'There is a comment in there about growth expectations potentially above their March projections, and following on the confidence numbers as well it does appear a September move is less likely.'
'The pendulum is swinging towards July and that's coming closer to being our view.'
ROBIN CLEMENTS, SENIOR ECONOMIST, UBS
'Importantly, we're still on track for a start to removing stimulus from mid-year. It's just that 'mid-year' has got closer so the language has moved to 'the coming months'.
'To my mind it keeps it on track for June, but doesn't pin it down to June. I think most views will stay the same - if you've got a July or September you'll probably stick with it.'
MARKET REACTION:
The New Zealand dollar fell around a quarter of a cent to around $0.7173/79 after the decision, while interest rate futures were up to 5 basis points higher.
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:
- Twelve economists expect expect the first rate hike in June, two in July and three in September.
- Financial markets are seeing a 40 percent chance of a rate rise in June and has fully priced it in for July 29.
- Annual inflation rate was 2 percent in the first quarter, with consumer prices rising 0.4 percent in the three months to March 31, close to the central bank's forecast.
- Data since the March review has been mixed, raising doubts about the strength of the recovery.
- The Reserve Bank of Australia earlier this month raised its rate to 4.25 percent, the fifth in seven months. The bank's chief said last week rates were pretty close to average.
* The 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 June 10.
(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 eighth consecutive review in which the RBNZ has held rates steady, and was expected by all 17 economists in a Reuters poll.
****************************************************************
KEY POINTS:
- RBNZ says expects to begin removing stimulus over the coming months, if economy recovers as forecast.
- RBNZ says higher bank funding costs reduce extent of future rate increases
- RBNZ expects economy to recover in line or slightly faster than forecast.
- RBNZ says export earnings stronger, but credit growth still subdued.
- RBNZ says risks to global outlook remains elevated, while trading partner activity has recovered faster than expected.
- Click on for official text.
COMMENTARY:
DARREN GIBBS, CHIEF ECONOMIST, DEUTSCHE BANK
'It's a little more upbeat than in March, when they were planning to hike in June and I think they are (still) more likely to hike in June given the contents of this statement.'
'I think it's pretty black and white, absent a complete meltdown in Europe, what we're seeing domestically and across the global economy is clearly stronger and that's being reflected in the RBNZ's more upbeat view.'
ADAM CARR, SENIOR ECONOMIST AT ICAP
'The decision is much in line with expectations, but I think they are being a bit cavalier in their approach to tightening policy. Inflation will surprise on the upside, and that to my mind will lead them to raise the cash rate by 50 basis points in the second half of the year. I stick to my forecast that they will start lifting rates by June, given the economic data and what is happening in Asia and Australia.'
CAMERON BAGRIE, CHIEF ECONOMIST, ANZ-NATIONAL BANK
'They've given themselves the ultimate flexibility, in terms of what the statement says. The 'coming months' to me says June or July but they've still got some conditionality around that and they're still expecting 1 percent per quarter growth.'
'That conditionality is a pretty high hurdle to meet.'
'At the moment I think September feels a little too late. When it comes to being a crap shoot versus June or July I'm a little more inclined to June at this stage.'
STEVEN WALTERS ECONOMIST, JPMORGAN
'We are still saying July and I think the language is still consistent with that. They've dropped the reference to mid-year and they're talking about the coming months and that gives them a bit more flexibility. They were locked in (with the mid-year reference) and this is more vague. It allows them more flexibility if things look a bit more sluggish.
'This is all about the global economy looking better. When they talk about the domestic economy, they are very cautious. On the domestic economy they are more dovish but they are more upbeat on the global economy. The disparity between the two is getting bigger. There is more growth offshore, less domestically.'
PHILIP BORKIN, ECONOMIST, GOLDMAN SACHS JBWERE
'It's still a reasonably balanced statement and the Reserve Bank is looking to maintain that level of flexibility around when the tightening cycle will begin.
'There is a comment in there about growth expectations potentially above their March projections, and following on the confidence numbers as well it does appear a September move is less likely.'
'The pendulum is swinging towards July and that's coming closer to being our view.'
ROBIN CLEMENTS, SENIOR ECONOMIST, UBS
'Importantly, we're still on track for a start to removing stimulus from mid-year. It's just that 'mid-year' has got closer so the language has moved to 'the coming months'.
'To my mind it keeps it on track for June, but doesn't pin it down to June. I think most views will stay the same - if you've got a July or September you'll probably stick with it.'
MARKET REACTION:
The New Zealand dollar fell around a quarter of a cent to around $0.7173/79 after the decision, while interest rate futures were up to 5 basis points higher.
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:
- Twelve economists expect expect the first rate hike in June, two in July and three in September.
- Financial markets are seeing a 40 percent chance of a rate rise in June and has fully priced it in for July 29.
- Annual inflation rate was 2 percent in the first quarter, with consumer prices rising 0.4 percent in the three months to March 31, close to the central bank's forecast.
- Data since the March review has been mixed, raising doubts about the strength of the recovery.
- The Reserve Bank of Australia earlier this month raised its rate to 4.25 percent, the fifth in seven months. The bank's chief said last week rates were pretty close to average.
* The 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 June 10.
(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.