RBNZ will led the depreciation of the NZD

December 10 (Thursday) Reserve Bank of New Zealand will take a decision on the Official Cash Rate (OCR). In this regard, during the week there will be sudden movements of the NZD, preceded by growth short-terms within the last week, after the appreciation of standardized dairy products. About 40% of the weight of the analysis providing an OCR change downwards. Trend analysis shows a certain underestimation of the position of the RBNZ.

The Reserve Bank uses monetary policy to maintain price stability as defined in the Policy Targets Agreement (PTA). The current PTA requires the Bank to keep inflation between 1 and 3 percent on average over the medium term. The Bank implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed eight times a year.

The opinion of 11th Reserve Bank Governor, Graeme Wheeler is that global economic growth has softened over the past six months, and uncertainty over the path of economic and financial adjustment in China has helped to depress commodity prices and added to financial market uncertainty. Interest rates at historic lows are encouraging higher leverage, leading to a build-up in risk in international asset markets. This environment creates risks for the New Zealand banking system, which remains reliant on the global markets for funding.

The logic of the monetary policy pursued by the bank and set intermediate targets for smooth trend suggests declines in interest rates in the medium term. In this sense, it is very likely on Thursday to see the fourth decline this year, probably with more -25 bp to 2.50%.