RBNZ monetary policy preview

Today Reserve Bank of New Zealand (RBNZ) will announce after meeting monetary policy decisions at 20:00 GMT.

Economic condition 

• New Zealand's economy overall remained robust throughout the crisis of 2008/09 however started facing headwinds due to slow down in China and Europe, two of its major importer.
• Dairy and other soft commodities have risen recently from their year long slump. However latest trade balance report showed not only revenue from dairy export slipped but volume has dropped too.
• GDP growth has slowed to 2.3% y/y and 0.9% on quarterly basis. Unemployment rate has dropped sharply in recent months and currently at 5.3%, which is lowest since 2008/09 crisis.
• Trade balance has been negative since June last year and August and September it rose above NZ$1 billion. Latest trade balance for January was just 8.11 million NZ$.
• Debt level is sustainable at close to 30.4% of GDP.
• Current account has deteriorated to -3.3% of GDP.
• Inflation remained subdued and grew only by 0.1% after averaging above 1.5% in 2014. According to latest, core inflation is at

RBNZ stance 

• RBNZ has lowered interest rates from 3.5% to 2.5%, however it is still the highest among developed world.

• RBNZ has hinted that it stands ready to take further action, which would be reduction in policy rates, However as of now it indicated to stay hold at 2.5%.

• Monetary policy showed RBNZ concern over real estate sector, where prices are rising sharply and lower rates might further push it up.

Expectation and impact 

• No rate cut is expected today, so wordings in the monetary policy statement and comments from Governor Stevens at 23:00 GMT, would be crucial. Key to watch would be to see, whether RBNZ is worried over recent appreciation of Kiwi.

• A strong indication of a rate cut today would lead to heavy fall in Kiwi, since such isn't expected much. Main focus will be on statement for further cues.

New Zealand Dollar is currently trading at 0.678 against Dollar.