New Zealand's central bank to debate 25 bp or 50 bp rate cut in February
SYDNEY, Nov 28 (Reuters) -New Zealand's central bank will debate whether to cut interest rates by 25 or 50 basis points in February, a senior central banker said on Thursday, after having disappointed doves in the market who had wagered on a super-sized 75 bp move this week.
In an interview with Reuters, Reserve Bank of New Zealand Assistant Governor Karen Silk said the central bank did not consider the case for a 75 bp cut because there was still work to do to bring down domestic inflation.
Headline inflation slowed to 2.2% in the September quarter, back in the target band of 1-3%, driven by a sharp decline in tradeable inflation, which the RBNZ expects to pick up to its historical average.Non-tradebale inflation, mostly homegrown price pressures, stayed high at 4.9%.
"If we drive all the way back to neutral now, it creates the additional risk that you won't get domestic inflation down," said Silk. "We have to make sure core inflation is also sustainably back at the target mid-point."
The RBNZ chopped its cash rate by 50 basis points to 4.25% on Wednesday, marking 125 bps of easing in just four months. Economists had overwhelmingly tipped a half-point move, but markets had priced in around a 40% chance for a whopping 75 bps cut. 0#NZDIRPR
That led markets to scale back the probability of another 50 basis points in February to 32%, even though RBNZ Governor Adrian Orr sounded open to such a move.
Silk said the central bank's rate projections do not suggest 100% weighting on either a 25 or a 50 bps move, but policymakers would debate the merits of both options in February.
Reporting by Stella Qiu; Editing by Sonali Paul
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
