Details of the RBNZ decision and statement from Governor Graeme Wheeler

  • Repeats " Further policy easing may be required"
  • Repeats "Monetary policy will continue to be accommodative."
  • Repeats that "headline inflation remains low, mostly due to low fuel and other import prices"
  • Repeats that "exchange rate remains higher than appropriate given New Zealand's low commodity export prices"
  • Repeats RBNZ to continue watching the data flow
  • Global financial market volatility has abated
  • Removes the line that "a lower New Zealand dollar is desirable"
  • Stronger NZD holding down tradeables inflation

NZD/USD was trading at 0.7020 just before the announcement and busted through the May high of 0.7054 and to 0.7102, the best level in a year.

The final three sentences of the statement are identical:

Monetary policy will continue to be accommodative. Further policy easing may be required to ensure that future average inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data.

The guidance on inflation has shifted. After previously warning on falling short-term inflation expectations, they say that "short-term inflation expectations appear to have stabilised"

This line:

We expect inflation to strengthen as the effects of low oil prices drop out and as capacity pressures gradually build.

Was changed to this:

We expect inflation to strengthen reflecting the accommodative stance of monetary policy, increases in fuel and other commodity prices, an expected depreciation in the New Zealand dollar and some increase in capacity pressures.

This is very close to the prior guidance on inflation.

Combing through the differences is splitting hairs but the line about better global growth and removing some anti-NZD jawboning are less dovish. Still, Wheeler has maintained a strong easing bias and a cut will come, it's just a matter of timing. Before the decision, market pricing for an Aug cut was 50-60% but that's probably too high now.

A press conference from Wheeler will take place at 11 am New Zealand time (2300 GMT, 7 pm ET)