Careful calibration needed for RBNZ as NZD weakens for the wrong reasons
Witnessing a currency declining from self-professed ‘overvalued’ levels is normally welcomed by any central bank. However, ahead of their policy decision on Thursday (Wednesday 21:00 GMT), we suspect the RBNZ might be a bit more nuanced. Markets are broadly expecting a hike but there is some expectation that recent declines in NZD and other developments may warrant some more caution. In particular, we note that the export-price driven currency adjustment should not be considered as ‘self-stimulus’: the RBNZ’s own studies suggest it could even be deflationary in the medium term.).
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