Market Musing, Asia Pacific

No change in policy from the RBNZ at today’s meeting, as widely expected. And given this was an interim review meeting, not a full forecast update, there was another fairly short post meeting statement. That said, we think were noteworthy tweaks in the RBNZ’s tone and guidance. After leading the central bank charge during the global tightening phase and maintaining a ‘hawkish’ bias for some time, the RBNZ has started to soften its message as the harsher NZ economic reality appears to be hitting home. This is no surprise to us as we never bought into the RBNZ’s surprisingly ‘hawkish’...

The RBNZ kept interest rates steady at 5.5% at today’s meeting. No surprises. But in a shock to market analysts and the NZD, the RBNZ’s tone and updated projections were more ‘hawkish’. The RBNZ is still grappling with a growth/inflation trade-off, and the latter continues to win out, for the time being at least. Despite the increasingly apparent weakness in the NZ economy (GDP has contracted in 4 of the past 5 quarters even with robust population growth) and widening cracks in the labour market (NZ’s unemployment rate has risen by ~1%pt the past year) concerns about inflation are (still)...