RBNZ will welcome continued Fed hikes – Westpac

FXStreet (Guatemala) – Analysts at Westpac noted that over the past week the Fed tightened rates for the first time in nine years, taking the target range for the Fed Funds Rate to 0.25–0.50%.

Key Quotes:

“The tone of the accompanying statement was upbeat on the outlook for the labour market and economy more generally. However, the Fed remained cautious on the path forward for interest rates, noting that future changes in the Fed Funds Rate were expected to be “gradual”.

This does not mean a mechanical process will be followed, or that rate hikes will be equally spaced. Instead, rates will be increased in a considered manner, based on incoming data. In line with the FOMC’s own forecasts, we anticipate that the Committee will increase the Fed Funds Rate four times in 2016 and another four times in 2017.

Continued hikes by the Fed would be a welcome development for the RBNZ as it would likely take some of the pressure off the NZD, boosting imported inflation and reducing the need for further OCR cuts. But as discussed below, there are challenges for inflation on several fronts.”

Analysts at Westpac noted that over the past week the Fed tightened rates for the first time in nine years, taking the target range for the Fed Funds Rate to 0.25–0.50%.

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