The Reserve Bank of New Zealand monetary policy meeting is this week

  • Announcement due Thursday 11 May (local NZ time)
  • Announcement due 2100GMT on May 10
  • The current official cash rate is 1.75%
  • As well as the OCR announcement there will be an accompanying Monetary Policy Statement & media conference

This is via Barclays:

  • The recovery in New Zealand's economic activity and inflation has been more rapid than the RBNZ's projections made in its Monetary Policy Statement in February 2017. Recent data on growth and inflation suggests that the economy is growing close to potential, while inflation has risen rapidly, touching 1% q/q (2.2% y/y) in Q1 17, the highest print in almost six years. What has been more surprising is the material rise in two-year forward inflation expectations in Q2, coming in at 2.17%, the highest print since Q3 2014.
  • In its last policy meeting in March, the RBNZ reiterated its neutral stance on monetary policy, and welcomed the downward adjustment in the exchange rate. Since that meeting, the NZD has continued to move slightly lower against the USD, but on a trade weighted basis it has moved considerably below the central bank's TWI projection over its forecasting period. While this move has been mitigated by the decline in oil prices, the longer-term implication of the move is higher inflation.
  • We do not believe the RBNZ is set to change policy course anytime soon, but think the bank could signal some normalisation in policy rates in the next 12-18 months, if current trends hold, in May's meeting statement. If a slightly higher path is signalled for interest rates by end-2018, we believe the bank may also provide a more dovish bias in comments in the press conference to reduce the potential for appreciation pressure on the currency. Aside from potential changes in stance, our base case is for no change in interest rates until the end of 2018, but we acknowledge rising risks of rate hikes in 2018.
  • A possible shift from an accommodative monetary policy stance could be complicated by the personnel changes at the RBNZ, as governor Wheeler is not seeking another term, when it expires in September. Deputy governor Grant Spencer will replace him as acting governor for a period of six months until March 2018. However, we do not think the change in leadership would prevent the RBNZ from normalising its policy stance, if needed.

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I've posted other previews for this week's RBNZ meeting earlier:

  • RBNZ meeting this week - no change is expected - preview 5
  • RBNZ meeting this week - no change is expected - preview 4
  • RBNZ meeting this week - no change is expected - preview 3
  • RBNZ meeting this week - no change is expected - preview 2
  • RBNZ meeting this week - no change is expected - preview

And:

  • An RBNZ 'preview' from NZ shadow board - recommend a tightening bias