By Chris Shaw<\/p>\n
The Reserve Bank of New Zealand (RBNZ) finds itself at an interesting juncture, as inflation has risen to a 16 year high to be roughly double the bank’s target rate, yet lifting interest rates to slow the economy and force inflation down is difficult given official rates of 7.25% are already high enough to be restrictive for the economy.<\/p>\n
As Stephen Koukoulas of TD Securities notes, adding to the difficult policy mix is a current account deficit of 9% and the inflationary impact of the 15% fall in the New Zealand dollar since late last year, not to mention signs of a global lift in inflation generally.<\/p>\n
Inflation in the quarter showed an increase of 1.5%, brining the annual inflation rate for the FY05\/06 to 4%, compared to 3.3% annualised in the March quarter.<\/p>\n
With recent data indicating the economy is now less likely to experience a hard landing than had been feared a few months ago, Koukoulas suggests there is now zero chance of a cut to interest rates anytime in 2006. <\/p>\n
He argues instead there is actually an outside chance of a further hike in rates as unless there is simply a lag between the previous rate increases and their impact on inflation, more may need to be done to stop the inflation rate from continuing to climb.<\/p>\n
This outlook of a rate rise being more likely than a fall leads him to favour a relatively strong currency in coming months, his forecast being for the Kiwi dollar to reach a level of about 65c against the greenback.<\/p>\n","protected":false},"excerpt":{"rendered":"
Stephen Koukoulas from TD Securities suggests there is now no chance of a rate cut in New Zealand in 2006, with a further increase possible as inflation continues to strengthen.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/52006"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=52006"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/52006\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=52006"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=52006"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=52006"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}