Details from the August 2018 RBNZ monetary policy meeting 8 August 2018

  • Prior decision 1.75%
  • Sees Dec 2018 cash rate unchanged at 1.8%
  • Lowers Sep/Dec 2019 rate forecasts to 1.8% vs 1.9% prior
  • Sees annual CPI at 1.8% by Sep 2019 vs 1.6% prior

The key line below is that they are looking to keep the rate at the current level for longer than they touted in May. that leans things a touch more to the dovish side.

NZDUSD dropped 40 odd pips to 0.6702 odd from 0.6747.

Full statement;

Official Cash Rate unchanged at 1.75 percent

Release date
09 August 2018

Statement by Reserve Bank Governor Adrian Orr:

Tena koutou katoa, welcome all.

The Official Cash Rate (OCR) remains at 1.75 percent. We expect to keep the OCR at this level through 2019 and into 2020, longer than we projected in our May Statement. The direction of our next OCR move could be up or down.

While recent economic growth has moderated, we expect it to pick up pace over the rest of this year and be maintained through 2019.

Robust global growth and a lower New Zealand dollar exchange rate will support export earnings. At home, capacity and labour constraints promote business investment, supported by low interest rates. Government spending and investment is also set to rise, while residential construction and household spending remain solid.

The labour market has tightened over the past year and employment is roughly around its maximum sustainable level. We expect the unemployment rate to decline modestly from its current level.

There are welcome early signs of core inflation rising. Inflation will increase towards 2 percent over the projection period as capacity pressures bite. This path may be bumpy however, with one-off price changes from global oil prices, a lower exchange rate, and announced petrol excise tax rises expected. We will look through this volatility as appropriate, and only respond to any persistent movements in inflation.

Risks remain to our central forecast. The recent moderation in growth could last longer. Low business confidence can affect employment and investment decisions. Conversely, there is a chance that inflation could increase faster if cost pressures can pass through into higher prices and impact inflation expectations.

We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation.

Meitaki, thanks.

Monetary policy statement here.

Ryan Littlestone

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