Trade Desk Thoughts: The Reserve bank of New Zealand lowered its Official Cash Rate (OCR) today by 50 basis points to 3.00%. The move was widely expected by economists.
“The world economy deteriorated very rapidly late last year, amid ongoing losses and extreme volatility in international financial markets, Governor Allan Bollard said in the statement which followed the decision.
The impact of difficult trading conditions is showing through clearly in reduced export revenues, weak business sentiment, and sharply curtailed investment and employment.
Officials noted that the OCR was now very stimulatory after 525 basis points of rate cuts and expect the economy will be further supported after the large amount of stimulus from fiscal policy.
The statement also made clear that officials are very unlikely to make another 50 basis point reduction.
“As economic activity troughs, we expect the rapid easing of monetary policy to slow, the statement said. Any future cuts will be much smaller than observed recently. We do not expect to see in New Zealand the near-zero policy rates of some countries.
Expect to see the kiwi well supported on the statement, said Matthew Carniol, Chief Currency Strategist at TheLFB-forex.com. If stocks advance, expect the New Zealand dollar outperform the lesser-yielding euro and pound.
Forex Technical Reaction: The kiwi jumped agains the dollar after the statement was released.