The following is February RBNZ meeting outcome and RBNZ Rate Statement highlights. Is the Bank comfortable with strengthening NZD and what is the further outlook?
February RBNZ meeting outcome
Following a cut of 0.25 percent, this time the Reserve Bank today left the Official Cash Rate (OCR) unchanged at 1.75 percent.
February RBNZ Rate Statement highlights
Bellow are the main highlight of the Reserve Bank’s Governor Graeme Wheeler statement:
The recovery in commodity prices and more positive business and consumer sentiment in advanced economies have improved the global outlook.
New Zealand’s financial conditions have firmed with long-term interest rates rising and continued upward pressure on the New Zealand dollar exchange rate. The exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradables sector. A decline in the exchange rate is needed.
Recent moderation in house price inflation is welcome, and in part reflects loan-to-value ratio restrictions and higher mortgage rates.
Headline inflation has returned to the target band as past declines in oil prices dropped out of the annual calculation.
Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.
February RBNZ statement concluding remarks
In conclusion, New Zealand’s economy continues to strengthen. Outlook over inflation has improved, house prices have slightly moderated following a recent boom, milk price has rebounded, and global outlook has marginally improved. However, the central bank is not comfortable with strengthening NZD because it lowers New Zealand’s competitiveness in the global export markets.
As such, the Reserve Bank Governor Graeme Wheeler talked NZD down. However, I believe the impact on NZD will only prevail in the short term. The NZD has already rebounded to the same level as it was before the last RBNZ meeting on 8th of November 2016, when the Governor reiterated the same message of expensive NZD. Only this time the New Zealand’s economy strengthened further.
Based on technical and fundamental NZDUSD analysis, the pair has reversed from a custom Fibonacci 10% retracement level and is expected to fall towards 0.7160 area.
What is your view of February RBNZ meeting outcome? Let us know in the comments section below.