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RBNZ Interest Rate Decision Preview – June 2017

The RBNZ is scheduled to release its latest rate decision today at 2200BST/1600CDT/0500HKT in which consensus is one-sided for the OCR to be kept on hold at the record low 1.75%, with all 26 economists surveyed unanimously forecasting no changes in rates.

Expectations for the central bank to stand pat tspanoughout the near-term and maintain a neutral tone were solidified at the last meeting, after Governor Wheeler explicitly stated that the RBNZ is neutral on policy and expects the OCR to remain at the current level for the foreseeable future. This view was also reinforced by Assistant Governor McDermott, who commented that the most likely scenario is for rates to remain stable for some time, despite noting that uncertainty remains elevated.

Recent mixed data also supports the notion for no changes in policy as Q1 GDP figures disappointed with Q/Q at 0.5% vs. Exp. 0.7% and Y/Y at 2.50% vs. Exp. 2.70%. This effectively rules out the likelihood of a near-term hike, while improvements in PMI and Manufacturing data alongside the recent upward trend in dairy prices also suggest looser policy is equally unlikely.

As the central bank is widely anticipated to keep rates unchanged, participants will turn their focus to the accompanying comments for any indications of policy bias with NZD likely to be supported by an optimistic tone on the economy or hawkish-leaning rhetoric. Conversely, the opposite could be expected if the central bank conducts any significant jawboning of the currency or if strikes an accommodative, or to a lesser extent neutral tone, which would dampen future calls for tightening.

Banks and Institutions’ Recent Comments & Calls

  • Westpac acting chief economist Gordon stated that the prospect of equal likelihood of rate cuts or hikes, could rattle financial markets which are largely focusing on rate hike scenarios.
  • ASB sees the RBNZ likely to lift the OCR from late 2018.
  • NZIER Shadow Board recommends the OCR to be kept unchanged alongside a tightening bias.

For other Central Bank Previews go to our Economic Date Previews category
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