RBNZ meeting: Optimistic, with a touch of caution
XM Group | Jul 12, 2021 11:29AM ET
Booming
New Zealand’s economy is firing on all cylinders. Economic growth easily overcame the RBNZ’s own forecasts in the first quarter, the housing market is on fire, and a range of business surveys point to a hot labor market along with intensifying inflationary pressures. Inflation expectations are moving higher as well, which implies this phenomenon might not be entirely ‘transitory’.
Normally, all this would argue for even faster rate increases. Demand is starting to run hot and it’s better to take your foot off the accelerator gently now, than waiting until inflation runs rampant and having to slam on the brakes, shocking the economy.
Taking a look at kiwi/yen, a disappointment by the RBNZ could see the pair head towards the 76.00 region.
On the flipside, if buyers stay in control and manage to pierce above 77.20, their next target may be the 78.75 zone.
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