New Zealand Dollar Climbs as RBNZ Implements Wait and See Approach
- The Reserve Bank of New Zealand left rates unchanged at 2.75% as expected
- The New Zealand Dollar climbed more than 0.58% against its US counterpart
- RBNZ Governor Graeme Wheeler said it is appropriate at present to watch and wait
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The New Zealand Dollar climbed more than 0.58 percent against the US Dollar after the Reserve Bank of New Zealand (RBNZ) announced a hold of its benchmark lending rate at 2.75 percent. Markets were expected the RBNZ to hold rates during this meeting after cutting three consecutive times since June of this year.
The central bank’s Governor Graeme Wheeler said that at present it is appropriate to watch and wait. He pointed to remaining concerns about the prospects for slower growth in China and East Asia especially. Additionally, Graeme Wheeler said financial markets are uncertain about the timing and effects of monetary policy tightening in the United States and possible easing elsewhere. Furthermore, Wheeler stated that some further reduction in the official cash rate seems likely to ensure future inflation settles near the middle of the target range. He said that inflation remains below the 1 to 3 percent target range.
Even though the central bank reiterated that further easing seems likely, the outlook of the RBNZ came across as less dovish than in its September meeting statement. Moreover, the central bank implemented a wait and see approach that is dependent on incoming economic data. Looking at 2-year New Zealand government bond yields, they rallied more than 0.54 percent after the announcement. This likely suggests that the markets are becoming less certain of more easing from the central bank in the near-term.
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