NZD drops heavily after the larger than expected rate cut

Key points:

Projections, RBNZ:

  • sees official cash rate at 1.21 pct in december 2019 (pvs 1.48 pct)
  • sees official cash rate at 0.92 pct in September 2020 (pvs 1.36 pct)
  • sees official cash rate at 0.91 pct in December 2020 (pvs 1.36 pct)
  • sees official cash rate at 1.59 pct in September 2022
  • sees TWI NZD at around 72.8 pct in September 2020 (pvs 72.7 pct)
  • sees annual CPI 1.7 pct by September 2020 (pvs 1.7 pct)

RBNZ says rate cut demonstrates commitment to meeting inflation target

  • says global economic outlook has weakened
  • says low rates, higher govt spending will support demand

Reserve Bank of New Zealand minutes:

  • committtee agreed larger initial monetary stimulus would best ensure meeting inflation and employment objectives.
  • the lower ocr path reflected the economic projections and the balance of risks discussed.
  • members noted that estimates of the neutral level of interest rates have continued to decline
  • committee noted that low business confidence had dampened business investment in 2018 and had remained weak in mid-2019
  • members noted that heightened global uncertainty was reducing investment and suppressing trading-partner growth
  • members noted this highlighted the risk of a larger or more prolonged slowdown in global economic growth.
  • committee agreed that the balance of risks to achieving cpi and employment objectives tilted to downside

more to come