RBNZ wants a weaker NZD – ING

RBNZ wants a weaker NZD, but simply wanting it will not be enough without some policies to back up this desire, according to Rob Carnell, Chief Economist at ING.

Key Quotes

“No big surprises from the August RBNZ meeting, with no change in the overnight cash rate from 1.75%, and no indication that rates would change in either direction any time soon. That said, the statement contained the suggestion that the NZD would need to be weaker “to increase tradables inflation and help deliver more balanced growth”.”

“Indeed, this was the main difference in the statement since the last one in May, when the RBNZ indicated its satisfaction with the decline in the trade weighted NZD since February. But unless the RBNZ decides to hint at more active measures, i.e. cutting rates, and unless the US Fed decides to speed up its tightening (seems unlikely) it is hard to see where this NZD weakness will come from.”

“Far from weakening, the immediate response to the largely unchanged RBNZ statement has been for the NZD to strengthen. Our sub-0.70 NZD/USD forecast for end 3Q17 looks very challenged right now and likely to be revised shortly.”