REPEAT: MNI SoP: Watch for Upside Tweaks From RBNZ Spencer

Repeats Story Initially Transmitted at 11:16 GMT Mar 21/07:16 EST Mar 21

--RBNZ Expected to Leave OCR on Hold at 1.75%

By Sophia Rodrigues

     SYDNEY (MNI) - The Reserve Bank of New Zealand interim governor Grant

Spencer may not make significant changes in his final official cash rate

statement but there is a chance of small tweaks suggesting a rate hike sooner

than previously thought.

     The RBNZ will announce its latest OCR decision Thursday, with financial

markets and economists expecting the rate to remain unchanged at 1.75%. The

decision is due at 0900 local time (2000GMT).

     Given this will be Spencer's final monetary policy decision before he hands

over the reign to incoming governor Adrian Orr on Mar 27, there is an

expectation that this will pass off as a non-event.

     But Spencer could surprise with a slightly more upbeat commentary

suggesting more conviction over the next rate move being up, perhaps coming

earlier than the late-2019 to early 2020 signalled in the February Monetary

Policy Statement.

     --SCRUTINY

     The statement is always brief and therefore every line needs more scrutiny

as they are carefully drafted. 

     The main reasons for greater optimism would be the global growth and

inflation outlook, and domestically steady, rather than further slowing, house

price growth, along with solid household consumption.

     On the exchange rate, the RBNZ might retain the line that the "trade

weighted exchange rate will ease over the projection period" though it is likely

they now expect to see the trade weighted rate lower that previously expected.

     The RBNZ's expectation could be that all this together would lead to an

upward revision in the forecast for tradable inflation, though forecast

revisions will not be done until the Monetary Policy Statement in May.

     --GROWTH STRENGTHENING

     The central bank could retain their outlook for growth to strengthen. While

Q4 GDP was lower than expected, one important positive was solid household

spending. In the February policy statement, the RBNZ pointed to household

consumption as a key upside risk to OCR forecast.

     On inflation, the RBNZ may point to slower rise in consumer price index

inflation in the near term, while expressing confidence that it will trend

upwards towards the midpoint of the target range.

     There may be a reason to make small changes to the last paragraph of the

statement, but, less than a week before handing over the reins of power, Spencer

may defer to the next governor. 

     So expect a reiteration of "Monetary policy will remain accommodative for a

considerable period. Numerous uncertainties remain and policy may need to adjust

accordingly."

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com