RBNZ: Expect NZD to decline gradually over the next few years - Westpac

RBNZ still expects the New Zealand dollar to decline gradually over the next few years, so the recent rise in the currency is expected to suppress inflation over the next year but not over the medium term.

Key Quotes

“Still, there was some escalation of the RBNZ’s concerns in the language of the latest statement, which noted that a lower exchange rate is “needed” (as opposed to “would help”) to rebalance the outlook for growth.”

“In a subsequent interview, Assistant Governor McDermott confirmed that this change of wording was meant to nudge the market towards considering the possibility of the RBNZ intervening in the foreign exchange market. We don’t think the message was any different, though: it still feels like the RBNZ is giving the exchange rate a nudge, whereas we and others in the market were expecting more of a shove.”