FX Update:
The RBNZ raised the official cash rate by 0.50% or 50 points yesterday to 1.5% marking the 4th rate rise in the past 8 months from the low of 0.25% The Central bank said they felt it appropriate to tighten monetary policy in light of rising inflation and to support maximum employment. This should give the RBNZ additional scope and flexibility to manage and mitigate rising inflation expectations. It’s a bold move we think with arguably most local analysts predicting only a 0.25% rise and not 0.50%. High consumer inflation clearly needs to come down much lower than the current 5.9% (December quarter), but then again, we are in the middle of a war and global supply chain shortages remain, causing disruptions to product delivery. A rise of 0.25% in our mind would have done the job when omicron and a supply chain issues causing inflation spikes look somewhat temporary.
Key Points:
- Putin said Tuesday that recent Ukraine peace talks had reached a “dead end” and that Russian troops would continue invading
- Tonight’s ECB meeting consensus is the central bank will leave rates unchanged, this rhetoric is causing concerns for
- New Zealand Manufacturing Index improved slightly in March although most surveyed were still negative with covid and supply chain issues the main talking point
- Although Chinese president Xi has said there will be no covid isolation restrictions, China have relaxed guidelines for home isolation
- Recent great US Data suggests a 50-point hike in May by the US Federal Reserve is imminent with further hikes in June and July on the cards
- The RBA should lift rates in the May meeting forward from August after Governor Lowe was more hawkish than anticipated