Steepening NZ yield curve

RBNZ introduces an easing bias

As expected, the RBNZ left interest rates unchanged at its OCR Review at the end of April.  However, the key news was the RBNZ moved from a neutral bias where interest rate movements could be “either up or down” to an official easing bias, but stating that:

• “The Bank … is not currently considering any increase in interest rates.”
• “It would be appropriate to lower the OCR if demand weakens, and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target.”

In mid-April, Deputy Governor, Grant Spencer, highlighted that the RBNZ did not feel it could do much more to cool the Auckland housing market, and that job really fell to the government to consider its own policies on resource management and tax.  The following week, Assistant Governor, John McDermott, highlighted NZ inflation has been stubbornly low, justifying NZ monetary policy to remain stimulatory for longer.