Policy Continuity at RBNZ?
Newly-appointed Governor Wheeler at the RBNZ made no adjustment to policy settings at his first policy decision overnight. What’s more, large parts of the policy statement were almost identical to the final statement issued by former- Governor Bollard. Market expectations for a dovish outcome had been building in the wake of the soft Q3 CPI report, but the new governor was clearly willing to look through subdued inflationary pressures – on this occasion at least. NZDUSD climbed 50 pips on the more balanced outcome. The strong exchange rate got a mention – but the language was no different to that previously used by Bollard. It is probably too soon to assume that policy continuity is a done deal however – granted, the statement did state that the RBNZ continues to forecast inflation rising back towards the centre of the policy range over time. However we note that Wheeler would not have been involved in the compilation of the previous quarterly monetary policy report, and it is still an open question what the next report due in Dec. 6 will show (Wheeler has no public speeches scheduled in the interim). S&P took a number of ratings actions on several of Australia’s regions. New South Wales had its AAA rating affirmed, but the outlook was lowered to negative from stable. Western Australia suffered the same fate. However, the State of Victoria’s rating was affirmed at AAA, outlook stable. The Australian dollar was indifferent to the headlines. The FOMC kept policy unchanged, as expected and made no material change to the language of the policy statement. Though markets expect the Riksbank to stand pat, a rate cut today cannot be excluded after Sweden’s soft inflation and confidence numbers. Our economists expect the Riksbank to wait until December before administering another 25bp of easing. Also on tap today are UK Q3 GDP data.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank