Fed June rate hike now slim

Recent US data affected by 'poor' durable goods numbers. No surprises expected from either the US Fed or the RBNZ

Bonds

Recent US data affected by 'poor' durable goods numbers. No surprises expected from either the US Fed or the RBNZ

28th Apr 15, 8:33am by bnzeconomists

By Raiko Shareef

US interest rates fell sharply on Friday on poor business investment numbers, but recovered somewhat overnight.

Local markets were closed yesterday for the Monday-ised ANZAC holiday.

The weak US business investment report would have encouraged those looking for the Fed’s policy rate to remain unchanged in 2015.

At the least, the very clear economic weakness through Q1 means very slim odds on a June interest rate hike. And it would take a sharp rebound in April’s data to encourage those calling for a September rate hike.

This week’s events will help inform those views, but seem unlikely to materially change them.

The all-important FOMC decision (Thursday) will be a one-page statement, and should reveal little-change to the watch-and-wait philosophy espoused at the March meeting.

It would certainly come as a great surprise to the market if the FOMC softened the ground for a June lift-off in rates.

The RBNZ’s OCR Review (also Thursday) has been sign-posted significantly by Assistant Governor McDermott’s speech last week. We would be surprised to see any material deviation in tone from the message there, which was that the bias for the OCR is more likely down than up.

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Source: NZFMA

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2 Comments

by Stephen L | 28th Apr 15, 10:22am 1430173339

Chinese data doesn't look too good either, although they are printing their way out of some of the bother.
http://www.telegraph.co.uk/finance/economics/11563767/Shanghai-equities…
Their sharemarket is booming as a result of the printing.
For Wheeler, I am at a loss to understand how he reconciles 0.1% inflation, and none on the horizon, with no action at all. He surely cannot any longer pretend that the markets are likely to mark the NZD down just because he would like them to. He would have to do something to cause that. And if he is in the end going to do something, as McDermott is hinting at, why would he not get on with it? What would he be waiting for?

by sadr001 | 28th Apr 15, 11:04am 1430175840

The RBNZ may have lost credibility as far as jawboneing the NZD down directly is concerned, but because most of the value attributed to the NZD is due to our high OCR, by jawboneing the OCR down they can lower the NZD for a few weeks until they lose credibility there as well. This could buy them time to bring in the new rules they have planned to force investors to restructure their property ownership.