The Reserve Bank of New Zealand monetary policy announcement is due on Thursday NZ time
- Wednesday 8 August at 2100GMT
I posted a preview up here earlier in the week
This now via BNZ (in summary, bolding mine):
There is a growing body of opinion that the softening New Zealand economy will necessitate the RBNZ moving to a more dovish stance.
- We do not share that view. From our perspective, inflation and inflationary pressures continue to rise and the economy is at a point of maximum sustainable employment. Accordingly, there remains a strong argument for interest rates to move progressively towards neutral.
- If the RBNZ could be convinced that the current set of faltering activity indicators would lead to falling inflation then one could similarly build the case for lower interest rates. We don't believe that such a case can be made at this stage.
there are a lot of things happening that we are very nervous about
- very weak business confidence
- a modest softening in many of the economy's partial indicators. These include: retail sales, car sales, net migration, housing market activity and commodity prices
- very disconcertingly, we haven't yet found any evidence that the recent fiscal easing has flowed into the real economy (albeit that it might take some time)
inflation is still on the up
- headline inflation is rising
- most importantly, core inflation measures are headed higher
labour market
- unemployment rate rose to 4.5% (from 4.4%) at the last reading but it's still on track to hit the RBNZ's 4.3% pick for March 2019
- labour cost data seem to be tracking at least as high as RBNZ expectations and we think there is probably upside risk to the Bank's forecasts
We thus maintain our view that the RBNZ should now be moving towards a formal tightening bias but we doubt that it will
- downside risks to growth that are so pervasive
- Accordingly, we think that the Bank's forward interest rate track will remain much as it was when the Bank produced its May MPS
