FXStreet (Bali) – Charles St-Arnaud, Economist at Nomura, notes that overall, it is clear that the RBNZ is downgrading its view of the economy and is thinking that it will need to cut further.
Key Quotes
“We find the reference to a peak in rebuilding activity interesting. In the June Statement on Monetary Policy, the RBNZ said “that earthquakerelated reconstruction in Canterbury, while close to its peak, is likely to remain elevated for the next few years”.”
“Today’s comment suggests that construction activity is to start to be a drag on growth sooner than expected, suggesting further downside risk to their growth forecast.”
“On the currency, while the RBNZ continues to expect further depreciation, the change in the language suggests that the needed adjustment is smaller than in June, especially with NZD having depreciated by 6% since then and by 12% since April on a TWI-basis.”
“We continue to believe that the RBNZ will cut again at the September meeting and once more before the end of the year, bringing the policy rate to 2.5% by year-end. We also agree with the RBNZ that further depreciation of NZD is likely, especially with milk prices likely to decline further in coming weeks.”
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