A good question from ANZ

Monday, August 1st 2016, 9:18AM

Frustration probably doesn’t half describe how RBNZ officials are feeling right now, ANZ economists say in their latest newsletter.

OCR cuts and tighter LVR limits have been signalled, yet the NZD is at 0.72 against the USD and approaching 77 on TWI basis – both close to where they were before the RBNZ first announced its special economic update last month. Global forces are clearly testing the RBNZ’s mettle.

An OCR cut next week is assured, but the question of ‘how low do they go’ remains. A June MPS scenario obviously signalled the possibility of a sub-1% cash rate.

But there is also an argument that if the RBNZ can’t control these forces (NZD strength), should it even bother trying, particularly when the domestic economy is not crying out for lower rates.


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