Back
16 Aug 2013
Flash: NZD/USD poised for creeping decline – BNZ
FXstreet.com (New York) - We continue to see a first Official Cash Rate (OCR) hike in March next year, from its current historic low of 2.50%, which could lead to a move for the NZD/USD, suggests the BNZ Research Team.
Key quotes
“We see the OCR moving steadily higher in 2014 to a 4.50% cyclical peak in mid-2015. In essence, borrowers face an outlook where floating rates are likely to be 2.0% higher in two years’ time.”
Current CPI inflation remains low, with the Q2 reading (0.7%y/y) below the RBNZ’s 1-3% target range. “However, higher growth against the backdrop of limited recent investment and a tightening labor market should soon feed through to higher inflation. A gradual decline in the NZD that we see unfolding next year should also contribute to higher prices for imports. We see annual inflation pushing toward 3% over the next two years. This will require rate hikes to prevent inflation breaching the top of the RBNZ’s target range.”
Key quotes
“We see the OCR moving steadily higher in 2014 to a 4.50% cyclical peak in mid-2015. In essence, borrowers face an outlook where floating rates are likely to be 2.0% higher in two years’ time.”
Current CPI inflation remains low, with the Q2 reading (0.7%y/y) below the RBNZ’s 1-3% target range. “However, higher growth against the backdrop of limited recent investment and a tightening labor market should soon feed through to higher inflation. A gradual decline in the NZD that we see unfolding next year should also contribute to higher prices for imports. We see annual inflation pushing toward 3% over the next two years. This will require rate hikes to prevent inflation breaching the top of the RBNZ’s target range.”