RBNZ cuts Official Cash Rate by 0.25%

RBNZ cuts Official Cash Rate by 0.25% to 2.00%, NZD Higher

The RBNZ have cut the Official Cash Rate (OCR) by 0.25% to a new record low of 2.00%. This was widely expected, despite calls for a large

The key points in the RBNZ statement are:
• RBNZ cuts the OCR by 0.25% to 2.00%
• Further policy easing will be required
• Monetary policy to remain accommodative
• Risk of further declines in inflation expectations
• House price inflation remains excessive
• House price inflation adding to financial stability concerns
• Growth supported by migration, construction and tourism
• A decline in NZD$ is needed
• Sees NZD Trade Weight Index (TWI) NZD at around 75.9 by Dec 2016
• Sees 90-day bank bill average 2.1% Dec 2016 (previously 2.2%)
• Sees 90-day bank bill average 2.0 pct march 2017 (previously 2.2%)
• Sees 90-day bank bill average 1.8% June 2017 (previously 2.1%)
• Annual CPI +1.0% Dec 2016 (previously +1.3%)
• Closely watching economic data
The NZD raced higher in immediate response.

The RBNZ significantly raised their expectations of the level of the NZD (TWI) by the end of 2016. Given their stated desire for a lower NZD, this was akin to using petrol to put out a fire!

The next OCR decision will be held on 22nd September 2016.

Below is link to the full RBNZ statement:

http://www.rbnz.govt.nz/news/2016/08/official-cash-rate-reduced-to-2-percent

Current indicative levels are:

NZD-USD 0.7280 / 0.7305
NZD-AUD 0.9430 / 0.9455
NZD-EUR 0.6510 / 0.6535
NZD-GBP 0.5595 / 0.5620
NZD-JPY 73.65 / 73.90

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