• RBNZ sees stronger house price inflation pressures and stronger domestic demand.
• RBNZ still sees NZD overvalued despite recent declines, outlook for NZD to remain elevated.
• RBNZ’s 90-day track implies OCR lifting from mid-2014, and an OCR peak of 4% in early 2016..
• We continue to expect the RBNZ will starting lifting the OCR from March 2014.
The RBNZ held the Official Cash Rate (OCR) at 2.5% at today’s review. The accompanying Monetary Policy Statement (MPS) held few fresh policy implications, particularly with the RBNZ’s 90-day rate forecast very similar to the outlook provided in March. The main forecast change was a higher NZD TWI outlook. The RBNZ is more confident that economic growth is accelerating, and underlying the forecasts is slightly stronger household demand. The RBNZ’s higher exchange rate outlook has effectively offset the inflationary impact of upwardly-revised house price inflation and flow-on effects to consumer spending.
Read the full report: Economic Research
Commonwealth Bank