RBNZ kept policy rate unchanged at 1.75%.

Statement was mixed to slightly hawkish sending Kiwi dollar 50 pips higher from 0.6920 to 0.6970.

  • Policy will remain accommodative for considerable period.
  • Numerous uncertainties remain, policy may need to adjust.
  • Forecast rates rising in 2Q 2019 vs 3Q 2019
  • Falling NZD if sustained will lift tradables inflation.
  • Inflation slowing to low of 1.5% in 1Q 2018.
  • Inflation reaching 2% in 2Q 2018 vs 1Q 2019.
  • CPI projected to remain near mid point of target range

RBNZ Governor Spencer’s press conference was rather optimistic saying outlook is very positive and the new government’s policy is a positive stimulus to aggregate demand of about 0.5% of GDP.

AUDNZD broke below 1.1000 for the first time since mid October, nZD$ next upside target seen at around 0.7020.