RBNZ to contribute to supporting maximum sustainable employment - ANZ

The new PTA was signed this morning, with the RBNZ now expected to contribute to supporting “maximum sustainable employment” in the context of its medium-term inflation target, notes the analysis team at ANZ.

Key Quotes

“This brings New Zealand’s policy mandate in line with those in the US and Australia. Although policy rates (and now mandates) in these economies are currently very similar, the policy outlooks are quite different. The RBNZ does not expect to increase interest rates until 2019, whereas the FOMC increased rates last week and expects two more hikes this year. Market pricing for policy in New Zealand is similar to that in Australia, with about a 30% chance of a hike priced for both by year end.”

“Given the similar policy outlooks for the RBA and RBNZ, we expect the NZD/AUD to keep muddling along. However, the NZD/USD will be put on the defensive in 2018. Policy rate differentials and diminishing global liquidity suggest depreciation may be only a matter of time.”