RBNZ likely keep official cash rate unchanged next week, hike by August 2018: Westpac Research

The Reserve Bank of New Zealand (RBNZ) is expected to hold its August interest rate setting meeting on Thursday, August 10, but it will be released on Wednesday at 2100 GMT. An Australian bank and financial-services provider, Westpac in its latest report said that the market pricing for the RBNZ has been fairly stable during the past week, a hike 100 percent priced in by August 2018.

It noted that they are less optimistic and expecting the official cash rate (OCR) to remain unchanged at 1.75 percent through next year. The central bank’s policy prescription remains the same: the economy needs to be allowed to continue to grow and gradually use up its spare capacity, in order for inflation to settle around the 2 percent target midpoint on a sustained basis, research note added.

And that means keeping official cash rate at record low levels for an extended period. As the CB starts to prepare its August Monetary Policy Statement, latest developments have generally been on the soft side: inflation was lower than predicted, the New Zealand dollar has risen, and the housing prices is falling much faster than the Bank expected, an Australian bank noted.

According to the Westpac, if the RBNZ was “firmly neutral” in its last review, it is hardly going to be mulling the timing of interest rate hikes this time around.

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