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November 3, 2017

FXPRIMUS, What to expect from RBNZ Official Cash Rate (OCR) decision on Wednesday 8th November?

Special Report on RBNZ Official Cash Rate (OCR), Wednesday November 8th.

This article is originally referred from FXPrimus Special Report.

Based on economic and monetary analyses RBNZ decided to leave rates unchanged at 1.75% in line with the Policy Targets Agreement (PTA) of 1%-3% and reiterated its view for a consistent accommodative monetary policy as emphasis on a weakening construction sector was given.

Q2 GDP Growth expanded 0.8% quarter on quarter, albeit, RBNZ’s outlook on GDP Growth seems to have changed while inflation raised to 1.9% (est. 1.6%) YoY.

Subsequently, a report showed that over the past 10 years housing cost increased 50.5% and household income rose a mere 42% while for the same period inflation rose 20.2%.

However, when looking at it on a year on year basis, lower rates have helped house prices acceleration slow down as lower mortgages became cheaper, hence, housing investing is likely to expand.

A weaker construction sector when housing investing is likely to expand indicates that the construction sector lags intrinsic cyclicality in this sector and its higher sensitivity to interest rates is a result of lower demand.

The slight lag seems to be generated by the activity in the sector versus the change in prices.

With the bank expecting growth to “maintain its current pace going forward” instead of expecting growth “to improve” it would be an overstatement to suggest that a rate hike is likely to be seen anytime soon.

Original Source: FXPrimus Special Report

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