New Zealand C.Bank to Stand Pat as Economy Rebounds

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WELLINGTON, Feb 19 (Reuters) – New Zealand’s central bank is expected to leave interest rates unchanged at its first monetary policy decision of 2021 next week, as the economy rebounds faster from the coronavirus pandemic, but any tightening is still a long way off.

In a Reuters poll, all 12 economists concluded that the Reserve Bank of New Zealand (RBNZ) will stand pat on Wednesday, and will continue to keep the official cash rate (OCR) at the historic low of 0.25% for the rest of the year.


Three economists expect rates to be hiked by the end of next year, while others see the RBNZ holding through the forecast period until the fourth quarter of 2022. Westpac Bank says it sees the first hike only in 2024.


“Markets are flirting with the idea of the RBNZ lifting the OCR, but we expect no hike until early-2024,” said Westpac Chief Economist Dominick Stephens.


The central bank cut interest rates by 75 basis points in March last year and said it would remain unchanged for 12 months, while also introducing quantitative easing to support an economy hit by border closure and coronavirus lockdowns.


But a quicker economic recovery and concerns about a red-hot property market buoyed by historically low interest rates have left markets speculating that the easing cycle has ended, and a rate hike may come sooner than expected.


RBNZ may revise up its forecasts for growth, employment and inflation, and add a forward guidance for the OCR, but stress that hikes remain a long way off and potentially even putting a date on it, ANZ Bank said in a note.


It also expects the timeframe of the Large Scale Asset Purchase (LSAP), or quantitative easing, programme to be extended to the end of 2022.


“Overall, the RBNZ will acknowledge–and be encouraged by–the better outlook, but will temper that with some caution,” said ANZ Bank Chief Economist Sharon Zollner.


“Striking the right balance will be a communication challenge.”


Reporting by Praveen Menon; editing by Sam Holmes


Source: Reuters

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