The Reserve Bank of New Zealand (RBNZ) remains on track to begin its tightening cycle as early as this October amid COVID-19 lockdown and rising house price inflation, the central bank’s Deputy Governor Geoff Bascand said in an interview with MNI on Tuesday.
Key quotes
“The central bank was "watching and waiting" developments but he did not believe that a "six-week delay in a tightening cycle makes much difference in the long term.”
"The tightening cycle is on hold, but we start from what was a projected reduction in stimulus to now waiting to see where this will go."
"But when we talk about tightening, we are talking about moving away from extremely loose conditions to somewhat less loose over time, and we are still a long way from neutral."
"This is a curve ball which has come in, and if it goes on for two or three months then it's a different world, but if it's a few weeks we can come back to our decision in October with some more certainty on how the economy is playing out."
Market reaction
Despite the hawkish comments, NZD/USD remains under pressure amid a broad US dollar recovery, currently trading at 0.6880, down 0.14% on the day. Earlier in the day, the kiwi circled around 0.6900 on strong New Zealand’s Q2 Retail Trade figures.
