Reserve Bank of New Zealand monetary policy announcement due at 2000 GMT 7 February 2018

  • Monetary Policy Statement (MPS) 2000 GMT
  • Governor Spencer's media conference at 2100 GMT
  • Spencer will speak in parliament from 0000 GMT

Earlier previews here:

More now (bolding mine):

ANZ:

  • The RBNZ will again leave the OCR at 1.75%, and retain a cautiously upbeat stance.
  • Developments since the November Statement have been mixed to say the least, but we are not expecting the broad spirit of its assessment to change a great deal.
  • A similar interest rate profile is likely (although at the margin the risks are perhaps that it is a touch lower).
  • The RBNZ is not expecting to have to tighten until the second half of 2019. This is a view we now share.

ASB (with added background info you might find interesting):

On Thursday, the RBNZ delivers its final Monetary Policy Statement, and penultimate Official Cash Rate (OCR) decision under the current Policy Target Agreement.

  • Grant Spencer has been acting Governor since Wheeler's 5-year term ended in September (just after the General Election). Adrian Orr has subsequently been announced as the new Governor, taking over on March 27th (just days after the March 22nd OCR review).
  • It's widely expected Adrian Orr will sign a Policy Targets Agreement that incorporates a second target of maximizing employment, alongside price stability. The details of such are yet to be announced.

With a change in team, rules and referee taking place at the RBNZ, along with the general consensus that there is no urgency to move rates (see chart of the week), there little need for the RBNZ to offer anything more than an update on where it sees inflationary pressure heading.

  • The published forecasts should depict a solid outlook for economic outlook.
  • A weaker inflation starting point and higher-than-expected NZD could result in marginal downward tweaks in the published OCR profile.
  • However, due to pending changes in the monetary policy framework, financial markets would be best to interpret the rate profile cautiously.

One of the key thematics we have been emphasising is interest rate convergence, with rising (but lower) global interest rates converging with upwardly drifting (but higher) NZD rates.

  • While our 1.75% OCR is currently above equivalent policy rates for most OECD comparators, global short-term rates are expected to play catch-up.
  • Current market pricing has close to three Fed hikes fully priced in for 2018, versus our on hold for 2018 OCR view and market pricing of around 15bps of OCR hikes by the end of the year. The removal of policy accommodation is also expected by the ECB and Bank of England, contributing to further compression with NZD rates.
  • Australian short-term rates are also expected to edge up, albeit gradually.