Dovish Statement From the Reserve Bank of New Zealand

September 9, 2009

The RBNZ did not cut its 2.5% official cash rate (OCR) for a third straight meeting, matching consensus market expectations, but an easing bias was kept that “expects to keep the OCR at or below the current level through until the latter part of 2010.”  The latest statement from Governor Bollard a patchy recovery now underway and a weak medium-term outlook that will be sustained only if kiwi appreciation doesn’t erode export competitiveness and household savings continue to improve.  Several drags on future growth are cited, the elevated exchange rate, weak income growth, and profits that remain under pressure.  Without a continuing accommodative monetary policy, the recovery would wilt.  Fortunately, CPI inflation “is expected to track comfortably within the [target] band over the medium term.”  

The kiwi climbed above 70 U.S. cents today for the first time since September 1, 2008. The low for the year of USD 0.4896 printed on March 4.  Ironically, the kiwi’s strongest level since end-2006 occurred almost exactly one year earlier at USD 0.8213 on March 11, 2008.  Like the Aussie and Canadian dollar, the kiwi has swung widely in recent years, chasing the ups and downs of commodity prices rather than responding to local developments.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.



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