RBNZ: A close call, but another cut is likely – HSBC

By FXStreet FXStreet (Delhi) – Research Team at HSBC, suggests that a cut is likely from RBNZ in this week’s monetary policy meet or soon after.

Key Quotes

“When it comes to the next RBNZ rate cut, the question is not if they will cut, but when? The main concern is that inflation remains well below target. Sure, the fall in the exchange rate over the past year should push some prices up. But the domestic economy is still showing signs of having significant spare capacity, meaning the outlook for domestically generated inflation pressure remains subdued.”

“Although recent surveys show that confidence has rebounded, after some alarming declines in the middle of the year, growth is still below trend and, at its current rate, is unlikely to drive a pick-up in inflation, in our view. In particular, employment growth has slowed while the pool of workers is still growing rapidly, thanks to inward migration. This combination has pushed the unemployment rate higher at a time when wage growth was already weak.”

“This all amounts to a strong case to cut the cash rate further. However, the timing is tricky. The RBNZ could choose to cut this week (our central case) or may wait a bit longer, …read more

Source:: FX Street