RBNZ Interest Rate Decision And Statement

Here’s a look at what’s going on in the markets and what we might expect for the event.

Schedule and Consensus

The interest rate decision is expected at 02:00 on Wednesday CET (or 20:00 on Tuesday EST), but the broadest consensus is that the bank will keep rates steady at 1.75%.

Where we’re likely to see change is an hour later when Governor Orr holds a scheduled press conference. The Governor is expected to give a more dovish outlook for the currency, something in line with what we saw from Australia last week.

There are even some analysts who are speculating that the RBNZ might try to outdo the RBA in a swing towards a softer stance.

What’s Been Going On

In order to understand how the market will react to this, it’s best to get a handle on why analysts and investors are expecting the change in stance.

Firstly, the more straightforward explanation is that New Zealand and Australia have a strong economic connection, and their currencies often move in tandem. In addition, economic issues in Australia are typically mirrored in New Zealand.

The RBA has recently softened their tone because of underperforming data releases due to the housing slump, trade issues, and the lack of growth in China.

Although New Zealand seems to have avoided the housing price slump, for now, they are still open to be indirectly affected by ongoing trade concerns. Not to mention, domestic economic data has been disappointing of late, as we’ve previously discussed.

The Case for Dovishness

The latest GDP data hasn’t been released yet, but from performance through other indicators, it doesn’t bode too well.

Inflation is still just below the target rate, registering 1.9% in the last couple of months. Tourist arrivals are up, but so is unemployment. This is showing a bit of a disconnect because even though businesses are anecdotally reporting that it’s hard to find workers, wages aren’t going up. They only increased by 0.5% at an annual inflation-adjusted rate.

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