We think that this morning’s RBNZ OCR review should pass without much market reaction, with the Bank’s key policy message likely remaining unchanged, suggesting that “monetary policy will remain accommodative for a considerable period”.
We don’t think that the Bank will join some other central banks in guiding towards policy normalisation, yet.
New Acting Governor Spencer has the opportunity to stamp his mark with a freshly re-written Statement and we hope he does, particularly with regards to the NZ dollar. We’d mark it as a sign of wisdom if he shifts away from making indefensible value judgements on the NZD and just stuck to the facts. The NZ TWI is below its average for the past year and in line with the average of the past 5 years, despite NZ’s terms of trade near a record high. Attempting to talk the NZD down, as his predecessor had a penchant for, therefore makes little sense.
The NZ rates market was quiet yesterday, with nothing much traded in the swap market and rates marked slightly higher, with the 2-year rate up 2 bps to 2.20% and the 10-year rate up 4 bps to 3.21%.
Global forces should see higher rates on the open, ahead of the RBNZ’s Statement at 9am.
There are a number of central bank speakers tonight at the BoE conference to watch out for, while Germany CPI data will also be closely monitored.