RBNZ Strikes More Hawkish Tone In Keeping Rates On Hold

Andrew Cummings
February 14, 2020

RBNZ Assistant Governor Christian Hawkesby said in an interview with Bloomberg today that the central bank has a "genuine neutral bias" on interest rates and "a genuine openness about where things go from here".

Sentiment continues to improve with the continued slowdown in the rate of growth in new coronavirus cases and as such global equity markets along with risk linked currencies have outperformed.

The GBP/NZD exchange rate slumped sharply after the Reserve Bank of New Zealand (RBNZ) signalled its intention to remain on hold unless the economic impact of the Wuhan coronavirus outbreak proves larger than expected.

The Reserve Bank of New Zealand (RBNZ) decided in favor of keeping rates unchanged on Wednesday in line with what the analysts had expected.


However, Orr said policy can be adjusted if the impact looks more deep-seated and longer lasting.

The statement pointed out that NZ employment "is at or slightly above its maximum sustainable level while consumer price inflation is close to the 2 percent mid-point of our target range". Monetary policy has time to adjust if needed as more information becomes available.

"The Committee discussed the reasons for an expected pick-up in growth over 2020, including monetary and fiscal stimulus and the high terms of trade".

But not before a sluggish start to the new year has been overcome.


A return to positive growth territory for the manufacturing sector would limit worries over the outlook of the New Zealand economy, encouraging hopes of a stronger first quarter. The bank will also publish new forecasts for growth, inflation and the cash rate.

The Bank did cut Q4'19 GDP by 0.4% pts on slower business investment into year end 2019 and by 0.6%pts in Q1'20 on the coronavirus.

The global economic environment has shown signs of stabilising and trade tensions have receded somewhat, it said.

Going forward, there are no more notable economic releases for New Zealand scheduled for this week and very few for the next week.


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