REPEAT: MNI ANALYSIS: RBNZ Rate View Unch But More Uncertainty

Repeats Story Initially Transmitted at 03:48 GMT Nov 9/22:48 EST Nov 8

By Sophia Rodrigues

     SYDNEY (MNI) - The Reserve Bank of New Zealand's monetary policy outlook

hasn't changed and a small nudge higher in the official cash rate forecast in

June 2019 isn't an indication it expects a rate hike earlier than previously

forecast.

     Rather, the fact that the 2.0% OCR forecast for March 2020 has been

maintained, and the uncertainty band around that forecast has been widened

clearly indicate the status quo as far as the rate outlook is concerned.

     Earlier Thursday, the RBNZ left the official cash rate unchanged at 1.75%

and also issued updated forecasts for the economy in its quarterly Monetary

Policy Statement.

     The forecasts showed the OCR at 1.9% in June 2019, compared with 1.8% in

the August MPS. However, the March 2020 forecast was maintained at 2.0%. There

were increases in forecasts for June and September 2020 to 2.1% and 2.2% from

2.0% and 2.1%, respectively, and December was added with a forecast of 2.3%.

However, RBNZ considers forecasts beyond March 2020 to be too far ahead to have

any meaningful impact.

     So the fact that the March 2020 OCR forecast remains at 2.0% is a better

signal than a minor upward tweak in June 2019.

     Significantly, there is now more uncertainty around that forecast than in

August. The RBNZ's two main risk scenario analyses show the possibilities that

the OCR could be raised by 100 basis points, or could be cut by 100 basis

points, by early 2020, depending on which of the two scenarios come to pass.

     In the August MPS, the uncertainty band was 75 basis points.

     The two key risk scenarios are 

     --global inflationary pressure increases more than expected; 

     --domestic capacity pressure is lower than projected, due to weaker growth

in consumption and residential investment activity.

     If the former risk materializes, the RBNZ expects the OCR to be 100 basis

points higher than its projection. The second risk would lower OCR by an equal

amount by the start of 2020.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com