Tuesday, October 27, 2015

RBNZ expected to cut rates again, decision close - Commerzbank

FXStreet (Córdoba) - The RBNZ has already cut its key interest rate since June in three steps, from 3.5% to current levels of 2.75% to cushion the effects on the real economy of the slump in key export goods prices, and to weaken the NZD, says Elisabeth Andreae, analyst at Commerzbank. They expect another rate cut this week.

Key Quotes

“Governor Wheeler repeated in his speech last week that some further easing in the key rate seems likely but would depend on the economic data”.

“There have been encouraging signals recently with regard to growth. Also, inflation in Q3 was a little higher than the RBNZ had expected. Even so, it is still well below the central bank’s target range”.

“We therefore expect a rate cut this week, although the decision should be a close one. Factors pointing to a cut are the higher risks in the emerging markets, especially China, the weaker export outlook, the renewed price slump in dairy products and the marked appreciation of the NZD since late September”.

“The fact that Wheeler referred to the risks of low interest rates for housing markets and inflation is unlikely to prevent him from moving on rates, just as it has failed to do so in the past”.
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