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29 Jan 2014
Flash: RBNZ not to hike rates until March - Westpac
FXstreet.com (Bali) - The RBNZ will hold rates unchanged until March, month when it will start hiking the OCR, notes Imre Speizer, FX Strategist at Westpac.
Key Quotes
"Our central scenario, to which we assign a subjective 60% probability, is that the RBNZ will wait until the March Monetary Policy Statement, when there is a platform to fully explain such a major milestone via detailed narrative and economic forecasts (the January meeting’s output is restricted to a one-page press release). Our central scenario has the RBNZ explicitly signalling a March start to the tightening cycl;e."
"If we are correct, 2yr swap rates should fall slightly because a January hike is 30% priced in. The 10yr will be less fazed and fall around 2bp. NZD/USD should fall only slightly if at all."
"Our hawkish scenario, to which we assign a 30% probability, has the RBNZ hiking tomorrow by 25bp. This would surprise the markets, not least because the RBNZ late in 2013 unveiled a refreshed communications strategy committed to transparent monetary policy proposals (among other things). The 2yr swap rate would probably rise by around 18bp from the current level, the 10yr by around 9bp. NZD/USD would rise by around a cent."
"A dovish outcome (10% probability) would not signal a March hike. 2yr swaps would fall 10bp, 10yr swaps -4bp, and NZD/USD would shed around a cent.. The market would be most surprised by this scenario but it would not abandon its view hikes are forthcoming in the near term given fundamental developments in the economy."
Key Quotes
"Our central scenario, to which we assign a subjective 60% probability, is that the RBNZ will wait until the March Monetary Policy Statement, when there is a platform to fully explain such a major milestone via detailed narrative and economic forecasts (the January meeting’s output is restricted to a one-page press release). Our central scenario has the RBNZ explicitly signalling a March start to the tightening cycl;e."
"If we are correct, 2yr swap rates should fall slightly because a January hike is 30% priced in. The 10yr will be less fazed and fall around 2bp. NZD/USD should fall only slightly if at all."
"Our hawkish scenario, to which we assign a 30% probability, has the RBNZ hiking tomorrow by 25bp. This would surprise the markets, not least because the RBNZ late in 2013 unveiled a refreshed communications strategy committed to transparent monetary policy proposals (among other things). The 2yr swap rate would probably rise by around 18bp from the current level, the 10yr by around 9bp. NZD/USD would rise by around a cent."
"A dovish outcome (10% probability) would not signal a March hike. 2yr swaps would fall 10bp, 10yr swaps -4bp, and NZD/USD would shed around a cent.. The market would be most surprised by this scenario but it would not abandon its view hikes are forthcoming in the near term given fundamental developments in the economy."