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RBNZ: Wheeler stresses 'uncertainty' and holds OCR

Mr Wheeler is playing it cautiously.

Rob Hosking
Thu, 09 Feb 2017

Reserve Bank governor Graeme Wheeler delivered a no surprises statement with this morning’s interest rate decision.

The official cash rate remains at 1.75% and the forward track for interest rates has only been lightly tweaked upwards.

Most economic data has been stronger than the Reserve Bank expected when it released its last monetary policy statement in early November. 

And, more critically, forward-looking business sentiment, profit, price, hiring and investment intentions are all pointing towards, if anything, slightly stronger expansion.

But Mr Wheeler is playing it cautiously.

The word "uncertainty" featured prominently in today's statement. 

"Monetary policy will remain accommodative for a considerable period.  Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly," he says.

In other words, minimal change, essentially, from the outlook for interest rates he signalled in November. 

There is a slight tweaking upwards of the track going into 2018 and 2019, which indicates that, perhaps, an OCR rise towards the end of this year rather than sometime in 2018, but that is all.

For now, the combination of higher global interest rates, feeding into higher bank funding costs and therefore higher retail rates, plus further moves by other central banks, is doing the work of the OCR.

And Mr Wheeler did not want to signal any earlier interest rate rises - to do so would be to push the New Zealand exchange rate, already seen as too high by the central bank, even higher. 

"A recent strengthening in activity indicators in advanced economies suggests the near-term outlook for global growth has improved. Headline inflation increased across many economies through the end of 2016, although this largely refected the impact of recent increases in oil prices," the central bank's monetary policy statement says. 

However - again - the RBNZ stresses the uncertain global outlook. 

Rob Hosking
Thu, 09 Feb 2017
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RBNZ: Wheeler stresses 'uncertainty' and holds OCR