NZIER shadow board split as RBNZ rate call turns line-ball for July

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A near-even shadow board points to genuine uncertainty heading into the July review, suggesting markets should not treat a hold as a foregone conclusion and may see volatility around the decision itself. The consistent view that the OCR needs to reach 3 to 3.25% over the coming year, regardless of the July call, anchors medium-term rate expectations even as members disagree sharply on sequencing. The divide largely tracks how much weight individual economists place on the now-fading oil price shock versus soft demand and elevated unemployment, a tension likely to keep NZD rate markets sensitive to each new inflation and activity print between now and the next review.


NZIER’s Monetary Policy Shadow Board narrowly favours holding the OCR at 2.25% in July, but calls it a line-ball decision against a 25bp hike, with members still agreeing rates should reach 3 to 3.25% within a year.

Earlier, not too much disagreement here:

but plenty here:

Summary:

  • NZIER’s Monetary Policy Shadow Board recommends, on balance, that the RBNZ hold the OCR unchanged at 2.25% in July, though it describes the call as line-ball against a 25 basis point hike
  • Members who favour moving the OCR back toward neutral sooner cited rising inflation as their key reason
  • Shadow Board members continue to agree the OCR should rise over the coming year, with views on the one-year level centred around 3 to 3.25%
  • Soft demand and an elevated unemployment rate were cited as reasons to weigh carefully the pace of any tightening
  • Individual members offered a range of views on the oil price shock, from seeing its inflation impact as temporary and fading to warning that price pressures could remain elevated for some time
  • The panel’s next scheduled reassessment point flagged by some members is the release of June quarter CPI data

The New Zealand Institute of Economic Research’s Monetary Policy Shadow Board is split heading into the Reserve Bank’s July review, with members recommending on balance that the Official Cash Rate be held at 2.25% while acknowledging the decision has become a genuine toss-up against a 25 basis point increase, according to NZIER.

The divide centres largely on how members read the fading oil price shock. Stephen Toplis argued the central bank needs to move rates toward neutral as soon as possible to avoid adding to inflationary pressure, pausing only once neutrality is reached. Viv Hall likewise called for an immediate increase to 2.50%, pointing to CPI and core inflation still running above the 1 to 3% target band. John Pask took a similar view, saying inflationary pressures look set to stay elevated for some time despite the recent memorandum of understanding between the US and Iran, and that the RBNZ should begin moving rates back toward neutral even after a weak June quarter for the economy.

Others argued for patience. Jarrod Kerr described the recent price spike as a temporary supply shock that is already unwinding as oil prices retreat, arguing rates should be held to let the economy recover rather than reacting to what he called shadows. Kelly Eckhold said the case for eventually raising the OCR remains solid but that urgency has eased given the sharp drop in energy prices, favouring a wait for June quarter CPI data before revisiting the question in September. Dennis Wesselbaum pointed to signs that inflation may be peaking even as expectations continue to drift higher, alongside subdued GDP growth, as reasons to hold steady once more. Kerry Gupwell called the decision finely balanced, preferring to hold in July for one more round of data while flagging that a measured increase would follow if wages, margins or expectations firm up.

Looking beyond July, the panel was more unified. Members continued to agree the OCR needs to rise over the coming year, with individual estimates for where the rate should sit in twelve months clustering around 3 to 3.25%. Several cited the need to bring policy back toward a neutral setting over time, while also flagging soft demand and an elevated unemployment rate as reasons for the central bank to calibrate the pace of any tightening carefully rather than move aggressively.

This article was written by Eamonn Sheridan at investinglive.com.

最近のFX関連情報Central Banks

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