Today Reserve Bank of New Zealand (RBNZ) will announce its monetary policy around 21:00 GMT. Over the past two years or so, RBNZ has reduced rates from 3.5 percent to 1.75 percent, which is an all-time low, however, the bank is unlikely to push a lot further, though it has some more room to do so. But for today, especially after New Zealand Governor Wheeler indicated a slower approach to a rate cut in previous instances, the central bank is expected to stand pat.

RBNZ is likely to play it cautious, as the inflation is on the rise across the world but recently lost some momentum, along with a recovery in commodity prices. In addition to that, when major central banks are planning to wind up these extraordinary stimulus measures, RBNZ is not likely to stand out.

As RBNZ would not like to fuel the Kiwi dollar higher, we expect the commentaries to remain dovish for now.

Let’s see how the economy and inflation has been doing in the recent past,

• After remaining at 0.4 percent in the first three-quarters inflation rose to 1.3 percent in the fourth quarter of last year and it rose further to 2.2 percent in the first quarter of this year.
• GDP growth has been relatively small. It grew 0.7 percent in the first quarter, grew by 0.8 percent in the next two quarters and by 0.4 percent in the final quarter of 2016. Unemployment rate is low at 4.9 percent but improvements may take place if GDP growth accelerates.
• Dairy farmers are suffering from costlier kiwi dollar. The recent fading of last year’s strength in the dairy price causing major concerns.
• Biggest risk remains speculations in the housing market but addressing the issue using regulations is definitely much effective than interest rate. At least, experience from Australia’s housing market suggests so.

New Zealand dollar is awaiting judgment at 0.69 against the dollar.