Economic Outlook
At face value, today’s RBNZ Monetary Policy Statement was dovish in nature. Despite the housing market going gangbusters, construction surging, the drought ending, GDP growth robust and the TWI much lower than anticipated, the Reserve Bank has stuck with its view the cash rate can stay where it is until the third quarter of 2014. The Reserve Bank’s forecasts are, it must be said, predicated on no change in prudential policy but Governor Wheeler suggested in the press conference that followed the MPS that tighter LVR (loan-to-value-ratio) constraints may be brought in as early as July. To the extent that this does happen to take the heat out of the housing market, and results in an increase in household savings, it might yet give the RBNZ more breathing space than we have assumed. But still not so much as to give the Bank the luxury of waiting until September 2014 to start removing stimulus.
Read the full report: FX Research
BNZ