RBNZ: Stable monetary policy is the likely backdrop - Westpac

The August Monetary Policy Statement was expected by markets and analysts to result in a modest dovish shift, but in Wheeler’s last meeting, they judged positive and negative developments were roughly balanced, and saw no need to change, notes the analysis team at Westpac.

Key Quotes

“Stable monetary policy is the likely backdrop for some time, and while markets price RBNZ hikes in late 2018, we forecast RBNZ on hold until late 2019, as headwinds for domestic activity mount.”

“RBNZ fired a shot across the bows by discussing NZD intervention. While we think it unlikely, the RBNZ’s threat may at least make some speculative longs nervous. We do expect NZD to decline given elevated positioning, RBNZ intervention warnings, a cooling NZ economy and expected decrease in the NZ-US interest rate spread.”