* The NZD has appreciated since the RBNZ’ September Review, mostly due to international developments.
* Inflation seems to have turned a corner, rising to 1.4% in QIII.
* The high NZD will dampen inflation pressures, but the RBNZ’s message is unlikely to change much.
We expect the RBNZ to leave the Official Cash Rate (OCR) on hold at 2.5% at the October Review on Thursday 31 October. The biggest change since the September Monetary Policy Statement has been a sharp appreciation in the NZD, largely as a result of events in the US (the Fed’s decision to delay tapering and the Federal Government shutdown). It looks like the Fed’s stimulus will remain in place for longer than previously thought, which has weakened the USD over recent weeks. The stronger NZD will dampen inflation pressures in NZ by lowering the cost of imported goods.
Read the full report: Economic Research
Commonwealth Bank