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No surprises from the RBNZ, cash rate unchanged at 2.50%

Written by Sam Coxhead on July 26th, 2012.      0 comments

9:15 AM (NZT) As expected the RBNZ just left monetary policy unchanged at their announcement. The statement was brief, and fairly much in line with market pricing. Expect no change in the cash rate from the RBNZ anytime soon. The statement I have copied below.
The NZ dollar has seen a small rise in demand following the statement. Any Investors looking for the RBNZ to point to a lower cash rate at some stage are ill informed. Any further reduction in the cash from the current emergency levels would be a consequence of a significant shock to the global financial system
Elsewhere overnight, a nice bounce back in risk appetite could not be thwarted by a horrible UK preliminary Q2 GDP number that came in at -.7% vs a market expectation of just a .2% fall. A joint German and Spanish statement pointing out the progress the Spanish Govt are making to curb spending seems to have reduced market fears of a Spanish Govt bailout in the short term. Spanish yields materially dropped as a result and this has helped boost wider market risk appetite and pulled the EURO off its knees for the time being. Also of interest is the open discussion of the ECB issuing the European Stability Mechanism(ESM) a banking licence. The ESM will provide the funding of bailouts, and having a banking licence would enable it to boost its power by borrow cash from the ECB.
The advanced US GDP number now becomes the economic data focus for the remainder of the week, and this comes in the US session tomorrow.
RBNZ Statement issued with their unchanged Monetary Policy decision.
OCR unchanged at 2.5 percent
The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.
Reserve Bank Governor Alan Bollard said: “New Zealand’s economic outlook remains consistent with that described in the June Monetary Policy Statement.
“New Zealand’s trading partner outlook remains poor, with several euro-area economies in recession.  There remains a limited risk that conditions in the euro area deteriorate very significantly.  The Bank continues to monitor the situation carefully given the potential for rapid change.
“Domestically, the Bank continues to expect economic activity to grow modestly over the next few years.  Housing market activity continues to increase as forecast, and repairs and reconstruction in Canterbury are expected to further boost the construction sector.  Offsetting this, fiscal consolidation and the exchange rate are constraining demand growth.
“Underlying annual inflation, which recently moved below 2 percent, is expected to settle near the mid-point of the target range over the medium term.
“It remains appropriate for the OCR to be held at 2.5 percent.”
          Past 24 hours
  Current level Pre-RBNZ  % Chge since RBNZ   Low High
NZD/USD 0.7905 0.7888 0.22%   0.7805 0.7916
AUD/USD 1.0311 1.0312 -0.01%   1.0174 1.0337
NZD/AUD 0.7669 0.7650 0.25%   0.7635 0.7669
AUD/NZD 1.3040 1.3072 -0.25%   1.3040 1.3098
NZD/GBP 0.5101 0.5092 0.18%   0.5036 0.5099
NZD/EUR 0.6505 0.6493 0.18%   0.6470 0.6515
NZD/YEN 61.81 61.66 0.24%   60.97 61.84
NZD/CAD 0.8022 0.8012 0.12%   0.7978 0.8032
Topics: RBNZ