RBNZ sticks to its guns as offshore uncertainties dominate – TDS

Prashant Newnaha, Senior Rates Strategist at TDS, notes that the RBNZ kept the cash rate on hold at 1.75% as TD and the market expected as the Bank looked past the soft Q4 GDP print and anticipates a jump in Q1 CPI to be temporary.

Key Quotes

“While the statement is neutral, we do think it underplays the risk of upside CPI prints beyond Q1.”

“But for the RBNZ, it is all about offshore risks. This leaves the Bank comfortably sitting on the sidelines.”

“Today’s statement reinforces the growing divergence between the RBA and RBNZ that should see the RBA hike before the RBNZ.”

“On this basis, the AUDNZD should ultimately cross above 1.10, while ACGBs should underperform NZGBs on this call.”