RBNZ Governor Spencer thrown into the deep end - AmpGFX

The RBNZ must revamp the monetary policy outlook this week facing a political minefield and the starting point for inflation is significantly higher than previously forecast, and it is now close to target, according to Greg Gibbs, Analyst at Amplifying Global FX Capital. 

Key Quotes

“The exchange rate has fallen to a low since mid-2016 and is likely to place some upward pressure on inflation. The economy is sending mixed signals with booming employment growth, and a tightening labour market, but a slump in business confidence generated by political uncertainty and a weaker housing market.  Retail sales have been surprisingly weak, even though consumer confidence has remained solid.”

“The new government has proposed more spending on infrastructure and affordable housing, but wants to slow immigration and further dampen the housing market.  The RBNZ may feel wary of antagonising the new government as it prepares to change the RBNZ mandate and add a monetary policy board with outside directors.  You might say the new ‘Acting’ Governor Spencer, leading his first MPS and press conference, has been thrown in the deep-end.  He may need to bring forward rate hike forecasts modestly and risk unwanted appreciation in the NZD.”