RBA / RBNZ: Content to stay on hold to assess the impact of this year’s rate cuts - TDS

Analysts at TDS believe that the RBA and RBNZ are done cutting rates and are content to stay on hold as they assess the impact of this year’s rate cuts.

Key Quotes

“The RBA has voiced an upbeat outlook under new Governor Lowe, pointing to the positive terms of trade impact on growth. However the RBA cited more flexibility around the inflation target as labor market dynamics remain unclear and headline employment trends lower. This provides scope for a dovish bias, but we see the RBA as closer to neutral.”

“On cutting rates to 1.75%, the RBNZ signaled that further rate cuts are not warranted to help the Bank achieve an annual inflation print close to 2%. Indeed, the case for additional RBNZ cuts was becoming harder to justify given strong growth and financial stability risks. The risks to our cash rate forecasts lie with the RBNZ, whereby they could be forced to begin hiking earlier than we currently expect (Q3 2018) should inflation pressures flare up.”