NZ central bank set to hold rates at record low, strike cautious tone
* RBNZ set to keep rates steady at 1.75 pct
* Most economists expect rates to stay on hold until Q3 2019
* Strong Q2 GDP in spotlight, but risks to outlook remain -
By Charlotte Greenfield
WELLINGTON, Sept 24 (Reuters) - New Zealand's central bank
is all but certain to hold rates steady and reinforce its dovish
stance on policy on Thursday, remaining wary of stubbornly low
inflation and the risks of an economic slowdown.
Concerns over a slump in business confidence, easing
migration and a cooling housing market have kept policy makers
cautious even as data last week showed the New Zealand economy
has picked up the pace from recent quarters.
At its policy review on Thursday, the Reserve Bank of New
Zealand (RBNZ) is expected to hold rates at a record-low 1.75
percent, where it has remained since November 2016, according to
all 18 economists polled by Reuters.
The central bank adopted a more dovish tone at its last
meeting in August, warning it would shift its bias towards a
rate cut if growth fell short of its expectations.
Businesses are also concerned about the centre-left
government's policies as well as a simmering international trade
war between the United States and China - New Zealand's biggest
All the same, economists said last week's data showing a
surprise 1 percent quarterly jump in gross domestic product in
the second quarter - double the RBNZ's predicted pace - meant
policy makers will retain a 'wait and see' stance, possibly for
more than a year.
"With GDP growth surprising to the upside of the RBNZ's
forecasts, the chance of an OCR cut in the near future seems
distant," said Dominick Stephens, chief economist at Westpac
No economists polled by Reuters were forecasting a cut in
the next five quarters, but all but one expected the bank to
hold rates until the end of the third quarter of 2019.
A third of the 18 polled thought it would lift rates by
On the whole, economists expect the RBNZ to remain cautious
given worries about low business morale and benign inflation,
which is running at an annual pace of 1.6 percent, below the
midpoint of the bank's 2 percent target.
Anecdotally, firms have complained about a recent 5 percent
hike in the minimum wage and have raised fears that
international investors would be spooked by a ban on many
foreign homebuyers and on new offshore oil and gas exploration
"The RBNZ will continue to dangle the rate cut carrot so as
to keep monetary conditions accommodative and the NZD low," said
Nick Tuffley, chief economist at ASB Bank.
(Reporting by Charlotte Greenfield
Editing by Shri Navaratnam)
© 2018 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.