VIEW: BNZ write: "Not only did the RBNZ keep...>

RBNZ: VIEW: BNZ write: "Not only did the RBNZ keep its cash rate at 1.0% today

but it has effectively raised the hurdle on any future rate cuts. Indeed. So

reluctant does the Bank appear to moving rates lower, we are now formally

shifting our view to rates on hold for the foreseeable future, albeit with the

acknowledgement that there is still a significant risk of a cut at some stage in

2020. The key to the RBNZ's reluctance to reduce its cash rate stems from its

enlightened view on the economy's potential growth rate. For a long time now we

have been stressing that softening investment growth and restricted labour

productivity meant the economy simply could not grow as fast as we have become

accustomed to. Belatedly, it now appears the RBNZ has come to that very same

view. The RBNZ's potential growth rate track thus now troughs at 2.2% in Q4

2021. All other things being equal that means that any growth much in excess of

2.0% will cause inflation to rise. More importantly, the current slowdown in

growth will not be sufficient to see inflation fall away to disconcerting

levels."