Lee Sue Ann, Economist at UOB Group, assesses the latest RBNZ monetary policy meeting.
Key Takeaways
“In a surprise move, the Reserve Bank of New Zealand (RBNZ) refrained from raising its Official Cash Rate (OCR), keeping it at 0.25% “for now”. According to the accompanying press release, today’s decision was made in the context of the Government’s imposition of Level 4 COVID restrictions on activity across New Zealand.”
“It seems clear that the RBNZ would have hiked today, if not for this week’s abrupt COVID19 developments. But it also shows us that the COVID-19 outbreak is at the forefront of the RBNZ’s decision-making, at least for the time-being. We still hold the view that the New Zealand economy no longer requires the extreme monetary stimulus a 0.25% OCR provides.”
“We think the current three-day, Level 4 lockdown should not leave a discernible scar on the economic front. But if the country heads into a prolonged lockdown, then a hike in October is much less likely. And if, worse, the outbreak is not contained, then this would result in a longer policy pause with OCR hikes off the table for a considerable period. But assuming a successful elimination of this outbreak, we should at least expect a 25bps rate hike by the end of this year.”
