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RBNZ to leave cash rate unchanged until 2013?

Written by Sam Coxhead on March 8th, 2012.      0 comments

10:00 AM (NZT) Dr Bollard has left the NZ OCR unchanged at the record low of 2.50% , and it’s could easily remain at this level into 2013. The high level of the NZ dollar continues to tame any inflationary pressure, and curb GDP growth potential by taming the tradable sector of the economy. The New Zealand dollar at these levels for a sustained period of time would probably mean the cycle will also be shallower once the hiking cycle starts.
The market’s reaction has been to weaken the NZD by up to .5%, which is understandable given the clarity of his words, and most probably aimed at offshore, somewhat dislocated investors.
Given the easy nature of monetary conditions globally, this is not expected to change in the short term. Even if we are close to the end of the extraordinary stimulus being offer from the world’s major central banks, its effects will take time to trickle through the mechanics of the global economy.
So unless we see a dramatic pull back in the value of the NZD on a trade weighted basis, expect little action from the RBNZ in Dr bollard remaining time as Governor.
We have the important Australian employment data later on today at 11.30AM AEST. If these numbers come out weaker than expected, similar to the 4th quarter GDP number yesterday, the increased likelihood of a further cut to the cash rate from the RBA in coming meetings will see the AUD come under renewed pressure.
          Past 24 hours
  Current level Pre-RBNZ  % Chge since RBNZ   Low High
NZD/USD 0.8160 0.8192 -0.39%   0.8105 0.8204
AUD/USD 1.0586 1.0575 0.10%   1.0506 1.0591
NZD/AUD 0.7710 0.7749 -0.51%   0.7681 0.7749
AUD/NZD 1.2970 1.2905 0.50%   1.2905 1.3019
NZD/GBP 0.5185 0.5204 -0.37%   0.5157 0.5209
NZD/EUR 0.6208 0.6230 -0.35%   0.6180 0.6238
NZD/YEN 66.25 66.50 -0.38%   65.40 66.55
NZD/CAD 0.8143 0.8181 -0.47%   0.8112 0.8196