RBNZ starts to set the stage for rate cuts this year
Continued economic weakness has seen the RBNZ open the door for considering rate cuts this year.
The RBNZ kept the cash rate unchanged at 5.5% today, but the press release – entitled “Inflation approaching target range” – and accompanying minutes suggest that the 14 August policy meeting will likely see the bank factor in a faster easing of policy when the staff updates its economic outlook.
In May, the RBNZ delivered an unexpectedly hawkish statement – entitled “Official cash rate to remain restrictive” – that factored in some risk of a further rate hike this year and forecasting that rate cuts would be “continue to be delayed” until 2025.
However, recent economic data still suggest that New Zealand is likely in recession and that rate cuts could start later this year. For example, GDP has languished for some time, unemployment is rising sharply, and inflation is improving.
Today’s press release and minutes suggest that the RBNZ is shifting its view to considering rate cuts this year, with the committee agreeing that while “monetary policy will need to remain restrictive … [the] extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures”, where “there are signs [that] inflation persistence will ease in line with the fall in capacity pressures and business pricing intentions”.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy, contributing to the investment decisions of the firm. Kieran has long experience as a macroeconomist in both the private and public sectors. He has worked most recently as Chief Markets Economist for National Australia Bank and was previously Chief Economist, Australia and New Zealand, for Barclays Bank and ABN Amro Bank/RBS. Kieran also worked as Principal Adviser on the macroeconomy and budget policy in the Commonwealth Treasury and Director of Forecasting.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
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