RBNZ OCR Review: Goodbye, Farewell, and Amen - TDS

'Acting' (since Sep 2017) RBNZ Governor Grant Spencer hinted at hawkish tones in November, compared with persistently unbelievable "the next move could be up or down" we heard from ex-Governor Wheeler over 2017, points out the research team at TDS.

Key Quotes

“Spencer fell well short of offering "the next move is up" rhetoric of the RBA.”

“The hawkish case, therefore, is a confirmation that the next move is up, even though the Bank's OCR projections clearly show higher rates from mid-2019. The dovish case rests largely with offshore risks, e.g. a trade war involving the U.S., New Zealand's #3 trading partner after China and Australia.”

“This OCR Review is widely expected to quietly pass the baton to Adrian Orr to manage the forthcoming tightening cycle. The elephant in the room, however, remains the Price Target Agreement (PTA) that incoming Governor Orr needs to sign up to, as we still have complete silence on this topic.”

“FX: The NZD at $US0.717 is trading on its 200dma, also the bottom of the range for 2018 to date. An unexpected dovish tone could see a test of the $US0.713 100dma.”

“Rates: OIS is flat at 1.75% through to August, and +25bp is barely priced for Jan 2019 (the RBNZ meets in Feb 2019). A whiff of a hawkish tone could see a rate hike fully priced by year end (last meeting Nov).”