A tricky read? NZ central bank chief wrong-foots markets
(Repeats story from Tuesday; no changes to text)
* Traders say confused by RBNZ Orr's policy messages
* Orr has not given a substantive policy speech in the past
* Orr says wants to reach wider audience than just traders,
By Swati Pandey and Praveen Menon
SYDNEY/WELLINGTON, April 16 (Reuters) - Just a year into the
job and Adrian Orr has managed to ruffle financial markets and
economists, not exactly what the New Zealand central bank chief
had in mind when he set out to demystify monetary policy.
On more than one occasion traders have been wrong-footed by
the Reserve Bank of New Zealand's (RBNZ) policy statements. And
just last month Orr stunned markets again by clearly stating
that a rate cut could very well be the next policy move, only
weeks after going against expectations by ignoring the U.S.
Federal Reserve's sharp dovish tilt.
Many traders who spoke to Reuters in the past two weeks
blame Orr for confusing the message, and some have even been
critical of frequent references to legends of the indigenous
Maori people in his speeches, saying they served little purpose
for financial markets eager for more policy clues.
"I am extremely frustrated at the lack of communications
for global market participants," said Annette Beacher,
Singapore-based macro-strategist for TD Securities.
"Since Adrian Orr has assumed the role, he's managed to
surprise the market every six weeks. We don't hear anything from
him in between policy decisions," Beacher said, echoing similar
complaints from others.
"So what do I recommend to my trading desk? I’m saying
trade the data but we're not quite sure what is going to happen
at the next meeting. It’s not meant to be this way."
Former central bank officials, including Geof Mortlock, who
worked at the RBNZ from 1983 until 2007, have also chided Orr
for not delivering any policy speeches since taking charge.
Instead, the New Zealand-born Orr has mentioned the Maori god of
forest and birds - Tane Mahuta - in many of his public speeches
to explain the bank's role in the economy or talk about culture
"If he devoted as much time to giving clear, comprehensive
speeches on monetary policy, everyone would be much better
informed as to what the Bank's thinking is," Mortlock said.
Calm and unruffled by his critics, Orr, who took the helm in
March last year, has said he doesn't want to be seen as
predictable nor for markets to simply rote-read his statements.
In an interview with Reuters earlier on Tuesday, Orr said he
wants to reach out to a wider audience than just currency
traders, analysts and bloggers.
"The broad audience for this bank is the public of New
Zealand. We are seen as a trusted institution but they don't
know what we do. So that is my communication challenge," he
Orr also defended the Maori references in his speeches as
part of the bank's efforts to reach out to wider groups.
"Metaphors have their limits and metaphors can be over used.
I get all that, but metaphors need to be introduced and created
In his relatively short span in the top job at the RBNZ, Orr
has already overseen a restructuring in the bank, initiated a
review of its legislation, undertaken a review of the conduct of
banks and insurance firms, and announced a new monetary policy
"To have criticism that I don't provide on-record speeches
is thin," Orr said.
Yet markets are puzzled by Orr's approach to signalling
When the Fed abandoned its rate tightening plans in
February, markets had expected the RBNZ to turn more dovish only
to have Orr hold on to a firm neutral stance.
And, as relatively sturdy economic data backed Orr's stance,
the central bank chief caught markets off-guard yet again in
late March by signalling a clear risk of a cut to the record-low
1.75 percent official cash rate.
"There are no obvious pockets of economic distress which is
why the market was surprised by the easing bias last month,"
said Westpac rates strategist Imre Speizer. "It's hard to
navigate the policy flip-flops."
In August last year, the central bank unexpectedly signaled
it would keep rates steady into 2020, a decidedly more dovish
stance than its previous guidance. Also, between August and
November, Orr introduced, dropped and then re-introduced a key
policy phrase that confused markets.
Michael Reddell, an ex-RBNZ official who served with Orr on
its monetary policy committee in the 1990s and 2000s, is
critical of Orr for not giving a "substantive" speech on
monetary policy in the past year.
"It would be unthinkable in Australia or the United States
or even under previous governors here."
Philip Lowe, the governor of the Reserve Bank of Australia
(RBA), has already given two public speeches since the start of
the year following on from 11 in 2018.
While a change is now in the offing at the RBNZ to make a
committee responsible for policy decisions next month, rather
than the governor alone, market players still believe Orr's
personal style would open up several possible scenarios for each
"The decision will be one thing but the style of the
governor will be an additional overlay now," Westpac's Speizer
(Reporting by Swati Pandey in SYDNEY and Praveen Menon in
Editing by Shri Navaratnam)
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