RBNZ delivered a hawkish tone – TDS

Analysts at TD Securities (TDS) offer their afterthoughts on Wednesday’s Reserve Bank of New Zealand’s (RBNZ) hawkish monetary policy decision.

Key Quotes:

“The RBNZ kept the cash rate on hold at 1% as expected, but the limited impact from the coronavirus and its upbeat economic outlook meant the MPS took on a hawkish tone.

The OCR profile was lifted from 0.9% to 1% in 2020, meaning the Bank does not expect to cut the cash rate this year. The cash rate profile was raised by ~15bps over 21/22 with the Bank's projections now placing a full 25bps rate hike by Q4'21.

The Bank did cut Q4'19 GDP by 0.4% pts on slower business investment into year end 2019 and by 0.6%pts in Q1'20 on the coronavirus. Q2/Q3 2020 GDP forecasts are little changed from Nov'19 MPS levels, but growth is then expected to accelerate to a 3.4%/yr peak in Mar'21.“