While we await Australian employment data (due at 0130GMT) here’s a recap of the RBNZ decision and statement today from MNI. A good summary.

The Reserve Bank of New Zealand increased the official cash rate to 3.25% from 3.0% as expected, but is now projecting a slightly more gradual run of increases than anticipated in March

  • high exchange rate is still having an unexpectedly strong downward pressure on inflation
  • above-trend growth is absorbing spare capacity and adding pressure to non-tradable inflation
  • overall wage inflation remains moderate
  • projection for annual inflation has been revised downwards
  • Wheeler had less to say about the currency than in the past
  • New Zealand dollar “has not yet adjusted to weakening commodity prices, although it is expected to do so.”

Regarding intervention in the currency market, Wheeler said the RBNZ’s intervention policy continues to be guided by its “traffic lights” system. First, the currency should be at an exceptional level, intervention should be justified by fundamentals, the action should be consistent with policy targets, and financial market conditions should be opportune.
“We will keep looking at the traffic light system and see whether those four tests are met,” Wheeler said, but refused to comment on what the light currently indicates.