Harbour Navigator: Regime Change at the RBNZ
14th August 2018
- The path of least regret for the RBNZ appears to be letting core inflation rise above 2%.
- A broad interpretation of the mandate motivates actions to support growth and business confidence.
- As the new regime beds down there may be more volatility in the rates and FX market, with a new voting committee still yet to come in 2019.
- In last week’s Monetary Policy Statement (MPS), the RBNZ surprised markets by shifting the projected start date of any hiking cycle a full 12 months into 2020 and publishing a relatively aggressive alternative scenario that sees the RBNZ cutting 100 basis points if GDP growth disappoints. With a new Governor and new Policy Targets Agreement (PTA), this has turned out to be the first real chance to gain a read on the new regime at the RBNZ.We believe there are four main take-outs from the August MPS.