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23 Oct 2015
RBNZ: Pressure piling up to cut rates further - ANZ
FXStreet (Bali) - Against the backdrop of failures to normalize monetary policies by the G4 countries (EU, UK, US, Japan), the pressure (via the high NZD) looks like it could really start to pile up on the RBNZ to cut rates further, notes the ANZ Research Team at ANZ.
Key Quotes
"For New Zealand, all eyes are again offshore, especially when you consider the ECB’s renewed dovish stance alongside what some are calling a mutiny at the Fed (with a posse of Fed members speaking out against “lift-off” in 2015), questions hanging over the efficacy of QQE in Japan, and with markets pointing to forthcoming RBA cuts."
"We don’t expect a cut next week, (but equally we can’t rule it out entirely), and we are becoming increasingly attuned to the prospect of global factors forcing the OCR lower."
"Slowly but surely, as the timing of G4 policy normalisation that was expected (by the Fed and BOE tightening and fading ECB/BOJ policy easing) gets delayed, we are becoming re-attuned to the idea that the more the NZD diverges from domestic fundamentals, the more interest rates will need to converge."
"This is all likely a story for 2016, rather than next week, but the point is, New Zealand yields are high in relation to global peers, putting upward pressure on the NZD, and downward pressure on already low inflation. The local economy is ticking along OK, and we’re comfortable that there are no immediate home-grown reasons for the OCR to go lower; we just don’t like what’s cooking offshore."
Key Quotes
"For New Zealand, all eyes are again offshore, especially when you consider the ECB’s renewed dovish stance alongside what some are calling a mutiny at the Fed (with a posse of Fed members speaking out against “lift-off” in 2015), questions hanging over the efficacy of QQE in Japan, and with markets pointing to forthcoming RBA cuts."
"We don’t expect a cut next week, (but equally we can’t rule it out entirely), and we are becoming increasingly attuned to the prospect of global factors forcing the OCR lower."
"Slowly but surely, as the timing of G4 policy normalisation that was expected (by the Fed and BOE tightening and fading ECB/BOJ policy easing) gets delayed, we are becoming re-attuned to the idea that the more the NZD diverges from domestic fundamentals, the more interest rates will need to converge."
"This is all likely a story for 2016, rather than next week, but the point is, New Zealand yields are high in relation to global peers, putting upward pressure on the NZD, and downward pressure on already low inflation. The local economy is ticking along OK, and we’re comfortable that there are no immediate home-grown reasons for the OCR to go lower; we just don’t like what’s cooking offshore."