30 Jul 2013
Flash: Can RBNZ hike be sustained? – BNZ
FXstreet.com (New York) - The BNZ Research Team postulates the chances of a RBNZ rate hike, and the sustainability of such decisions.
Key quotes
“As to whether the market’s current RBNZ rate hike pricing can be sustained, our sense is that it mostly can, although it’s hard to imagine a scenario in which even more tightening is priced in.”
After all, a March 2014 hike is now more than fully priced into the curve, with 170bps of tightening factored in over the coming two years. Rock-bottom headline inflation and the likelihood that the RBNZ’s new macro prudential tools are soon put to work mean an earlier than March hike looks unlikely.”
“However, at the same time, upcoming NZ data should reinforce the need for policy normalization next year, limiting dips in local swap yields.”
Key quotes
“As to whether the market’s current RBNZ rate hike pricing can be sustained, our sense is that it mostly can, although it’s hard to imagine a scenario in which even more tightening is priced in.”
After all, a March 2014 hike is now more than fully priced into the curve, with 170bps of tightening factored in over the coming two years. Rock-bottom headline inflation and the likelihood that the RBNZ’s new macro prudential tools are soon put to work mean an earlier than March hike looks unlikely.”
“However, at the same time, upcoming NZ data should reinforce the need for policy normalization next year, limiting dips in local swap yields.”