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As recently as 3rd Feb RBNZ governor Graeme Wheeler delivered a much acclaimed speech which was generally interpreted to mean that there would be no further rate cuts in the near future. Wheeler had said "If concerns deepen around the prospect for the global economy and its impact on New Zealand, some further policy easing may be needed over the coming year". Since then the news flow about the "global economy" has been widely considered to be slightly improved. So a rate cut was totally not anticipated.
That said, as the RBNZ statement rightly pointed out the prospects for New Zealand's exporters have deteriorated compared with the environment on 9th December. The move caused the Kiwi dollar to tumble as much as 1.4 per cent to NZ$0.6650 against the greenback. It is currently trading at NZ$0.6672.
Graeme Wheeler also planted the seeds for more interest rate cuts, saying "further policy easing may be required to ensure that future average inflation settles near the middle of the target range".
"The RBNZ has clearly been spooked by the recent weakening in the outlook for the global economy, the strengthening in the New Zealand dollar and the fall in domestic inflation expectations," said Paul Dales at Capital Economics.
