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Consolidation Mode But Remains Bearish

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Fails To Hold Onto Thursday’s High

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RBNZ chief economist Ha told BBG that “if we were sitting here and still seeing very low interest rates, then you might say the risks are actually more on the upside…But market pricing has moved a long way in a very short space of time.”

  • Ha noted that downside risks, including the Omicron COVID variant, were unlikely to alter the broader inflationary dynamic evident in New Zealand at present, highlighting a need to remove monetary stimulus.
  • Ha pointed to continued discussion re: the “managing down” of the Bank’s NZGB holdings, while noting that any related sales would be to the Treasury, as opposed to the broader market: “That’s just for market functioning and coordination. You don’t want both the Treasury and the Reserve Bank trying to sell government bonds into a market. Essentially it would be negated or cancelled behind the scenes, and then Treasury would have to figure out would they reissue the bonds that we’ve retired or not.” He flagged a want to make any such moves as unexciting as possible.
  • In terms of tightening, Ha stressed that the Bank is “comfortable tightening monetary conditions through the OCR, we’ve got a lot more comfort on how that works, the calibration, the quantum.”