Highlights of the RBNZ bi-annual financial stability report:
- Dairy slowdown and high Auckland house prices are key economic risks
- China slowdown seen having potential major impact on New Zealand via lower commodity prices
- Sees less scope for monetary easing to offset sharp rise in funding spreads
- Has responded to increased volatility in money markets by increasing participation
- Too early to judge effectiveness of new macro policies on Auckland housing
- Recent NZD weakness a significant buffer for economy
- Transmission of RBNZ mon pol affected by fewer market makers in FX swap market, low bank risk appetite. In response, RBNZ has increased participation through open market operations and FX swaps.
Not exactly a ray of sunshine but it's tough to be upbeat when you're talking about risks.
The bolded headline is a bit of puzzle. I'm not exactly sure what they're saying here and I'm looking for the full text but anytime a headline reads 'less scope for monetary easing', it's a bullish knee jerk.
RBNZ Governor Wheeler is scheduled to speak 5 minutes after the release of the report.
NZD/USD was trading at 0.6522 ahead of the data and fell to 0.6501 on the first headlines but it later completely retraced.
