RBNZ to cut end of H1 – Westpac

By FXStreet FXStreet (Guatemala) – Analysts at Westpac explained that there is stubbornly low inflation in NZ.

Key Quotes:

“This will be the key concern keeping policy makers at the RBNZ awake at night. Weakness in commodity prices, particularly oil prices, was a key contributor to the very low levels of inflation in New Zealand over the past year. Developments in recent months have highlighted the risk that this could continue to be a significant drag on imported inflation over 2016.”

“On top of this, retailers are reporting that competitive pressures mean that their ability to push through price increases is limited. Finally, growth in the population is helping to limit inflation in the labour market.”

“The above conditions, combined with a still gradual recovery in the global economy and slowing domestic growth, lead us to expect that the RBNZ will need to cut the OCR further over the coming year. But there is a question about when this will occur. The RBNZ has stated that they think the easing in policy to date will be enough to generate a sustained lift in inflation back to around 2%.

However, we have our doubts. We expect that by mid-2016, the lingering softness in inflation and slowdown in …read more

Source:: FX Street