FXStreet (Bali) – Westpac reviews the Reserve Bank of New Zealand decision earlier today, noting that the central bank sounded more optimistic on the economy compared to the September MPS, noting that a December cut is no done deal.
Key Quotes
“The RBNZ said it was too early to tell whether the recent rise in dairy prices would be sustained – presumably, if they are, the OCR is less likely to be cut.”
“High Auckland house prices were mentioned, although the RBNZ seemed less uncertain on this front.”
“The RBNZ explicitly linked the exchange rate and interest rate decisions, saying that if the exchange rate sustained its recent rise “a lower interest rate path than otherwise” would be required.”
“The last of these particularly caught our eye, and prevented us from interpreting the statement as unambiguously hawkish.”
“If we are right about the way conditions are going to develop, the RBNZ would most likely cut the OCR in December, because of the high exchange rate.”
“But there is much water to flow under the bridge between now and December, so we must repeat our caution from last week – a December cut is no done deal. The RBNZ is very open minded.”
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