Dovish Statement From Reserve Bank of New Zealand
While cutting their cash rate by the expected 50-basis point increment, New Zealand monetary officials surprised market observers in two ways. Like the Bank of Canada earlier this month, they pledged not to raise the benchmark rate above its new level until at least the second half of 2010. They also left open the door to the possibility that the 2.5% cash rate, which is 575 basis points below the cyclical peak already, might be lower further. The second surprise was an admission that the kiwi has been stronger than expected, which has contributed along with higher long-term rates to “an unwarranted tightening in financial conditions.” Such an admission effectively dares the markets to price New Zealand’s currency lower.
Copyright 2009 Larry Greenberg. All rights reserved. No secondary distribution without express permission.
This entry was posted on Thursday, April 30th, 2009 at 2:39 pm and is filed under Central Bank Watch. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
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