Whattup, fellas! On Wednesday at 9:00 pm GMT the Reserve Bank of New Zealand will publish its monetary policies for the month of May.
What are traders expecting and how can you grab pips from the event? Here are points that might help:
No policy changes in March
As widely expected, the RBNZ didn’t make any changes to its policies back in March. Instead, the central bank talked about the not-so-impressive growth, which it believes was caused by poor weather in Q4 2017.
That blip aside, the RBNZ still believes that the combo of higher terms of trade, accommodative monetary policy, government spending, and tighter labour conditions will all stimulate growth down the road.
The RBNZ wasn’t as breezy about inflation, however. See, members expect consumer prices to “weaken further in the near term” as the economy adjusts to government charges and softer food and energy prices.
Overall, the statement hinted that members feel chill about their current policies. Their lack of concern over Kiwi’s high exchange rate at the time also helped push the comdoll higher against its counterparts.
What are traders expecting?
Market players don’t think there will be any policy changes, so RBNZ’s cash rates are estimated to remain at 1.75%.
That doesn’t mean that the event will be a non-mover, though! Here are a couple of issues that investors will look for in Governor Adrian Orr’s presser:
Back in late March Finance Minister Grant Robinson shook hands with Orr to add “maximum levels of sustainable employment” under the new Policy Targets Agreement. If you recall, the central bank only had to target an inflation rate of around 1% to 3% in its previous mandate.
Given that New Zealand had printed an annual inflation rate of 1.1% in Q1 2018 (down from 1.6% in Q4 2017), and that the unemployment rate recently slid to an 8-year low of 4.4%, it’s likely that labour market conditions will take a backseat to inflation concerns.
Or not. Analysts are still waiting to see exactly how the RBNZ will interpret its new mandate and how it will affect the central bank’s decision-making and communication processes.
Stage fright for the new RBNZ boss Orr nah?
In case you missed it in your forex calendars, the RBNZ will conduct a presser an hour after the statement. This will be a first for Orr, who officially took office a week after the March statement was released.
Many expect Orr to be comfortable in front of the cameras. In fact, some have joked that he has given more interviews and statements in the last weeks than his predecessor has in his term. In one of his first interviews, Orr shared that:
“We need to communicate better to a wider audience as to what are we doing, how we are doing it and how we are balancing things. We need a richer dialogue.”
He also added that
“We need a broader view of what the central bank is really about. We’ve got an enormous amount of grey matter in here — that can be used more effectively.”
Question is, will Orr use his quest for transparency to communicate hawkish or dovish remarks?