RBNZ to ignore short term inflationary pressures
With Governor Orr at the helm the RBNZ has taken a more dovish stance than of old. You may have looked at the improving situation for New Zealand and thought that perhaps the RBNZ will be changing from it's August, 'lower for longer' rate increase policy.
In the lead up to the November Monetary Policy statement there was a cocktail of inflationary pressures. In September 19 the GDP was a beat at +1.0% vs +0.8% expected. In Oct 15 there was higher inflation at 0.9% vs 0.7% expected. Secondly, Employment was up at 1.1% vs 0.5% expected on November 6 and the unemployment rate was lower at 3.9% vs a 4.4% expected figure. Good inflationary stuff, so perhaps the RNNZ will alter their rate hike projections?
However, when the RBNZ released their November Monetary Policy statement they recognised this positive data, but did not alter their forecast to OCR hikes. The RBNZ are ok to see an inflation and employment overshoot. After all, even with a+2.2% CPI rate that sits quite comfortably within their 1-3% inflation band. So, this week we have the RBNZ's Financial Stability report. I think we can expect the RBNZ to acknowledge inflationary pressures, but don't expect them to alter their course, especially as a lot of the source of inflation has been from fuel prices, which are now falling.
So, any deviation from this may make for trading opportunities.
