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RBNZ will not tighten again until Sept 2015 - Deutsche Bank

FXStreet (Bali) - According to Deutsche Bank, given the near-term inflation track in New Zealand, they see the RBNZ unlikely to tighten policy again until September next year, adding that NZD/USD is set to decline to 0.65 over 2015.

Key Quotes

"Last week the RBNZ announced that it had decided to retain the OCR at 3.5%. The Bank’s statement was very brief and, in our view, was designed to largely hold ground ahead of the December MPS. We read the statement as being ‘dovish’."

"However, we think the Bank’s tightening bias has been maintained, albeit less explicitly than previously, with the Bank noting that ‚inflation is expected to increase as the expansion continues."

"A period of assessment remains appropriate before considering further policy adjustment.‛ Whilst the statement no longer says ‚some further policy tightening will be necessary to keep future average inflation near the 2 percent target mid-point‛ we think it would be a mistake to attribute much to that deletion. Given the near-term inflation track we project we think that the RBNZ is unlikely to feel compelled to tighten policy again until September next year."

"With the RBNZ slipping to a less hawkish stance, US monetary conditions are arguably more important than the RBNZ for the NZD at the moment. We see NZD/USD declining to 0.65 over 2015, but with the RBNZ expected to move after the Fed, the timing of the next step down is largely in the Fed’s hands. Until a clear signal on the Fed’s timing emerges, we would expect only a moderate weakening in NZD/USD."

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