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Repeats Story Initially Transmitted at 05:24 GMT Mar 21/01:24 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
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.
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
--MNI London Bureau; tel: +44 203-586-2225; email: firstname.lastname@example.org