The New Zealand Dollar is trading slightly better shortly after the Reserve Bank left the Official Cash Rate on hold at 1.75%, as widely expected.
At 2142 GMT, the NZD/USD is trading .6947, up 0.0042 or +0.61%.
Acting Governor Grant Spencer reiterated the same message the RBNZ had been giving all year; the housing market is cooling, inflation is muted and the economy is steadily improving.
“Global economic growth continues to improve, although inflation and wage outcomes remain subdued,” Mr. Spencer’s statement said.
“Commodity prices are relatively stable. Bond yields and credit spreads remain low and equity prices are near record levels. Monetary policy remains easy in the advanced economies but is gradually becoming less stimulatory.”
Spencer’s statement also contained references to global uncertainties, and the new government’s policies.
“The Bank has incorporated preliminary estimates of the impact of new government policies in four areas: new government spending; the KiwiBuild programme; tighter visa requirements; and increases in the minimum wage. The impact of these policies remains very uncertain.”
“House price inflation has moderated due to loan-to-value ratio restrictions, affordability constraints, reduced foreign demand, and a tightening in credit conditions. Low house inflation is expected to continue, reinforced by new government policies on housing.”
“Annual CPI inflation was 1.9 percent in September although underlying inflation remains subdued. Non-tradables inflation is moderate but expected to increase gradually as capacity pressures increase. Tradables inflation has increased due to the lower New Zealand Dollar and higher oil prices, but is expected to soften in line with projected low global inflation. Overall, CPI inflation is projected to remain near the midpoint of the target range and longer-term inflation expectations are well anchored at 2 percent.”
Finally, the RBNZ left its policy statement intact. “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.”
This article was originally posted on FX Empire
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