In an interview by Australian Financial Review, RBNZ Governor Adrian Orr said the “single biggest” factor for -50bps rate cut was domestic. Inflation expectations were starting to decline and “we didn’t want to be behind the curve”. He added, “we want to keep inflation expectations positive – near the mid-point of the band.” But Orr also noted that “global interest rates had swung dramatically between our monetary policy statements.” And the large swing in forward interest rates suggested “a significant story behind that.”
Orr also noted “investments has really been on hold for a while” globally, “given political uncertainty across many, many regions”. ” US-China escalating trade challenge, and that’s real now… Likewise, other countries: the Italians without government, Brexit, Hong Kong… So that manifests itself from being a political uncertainty, to capital no longer being invested. So this is one of the rolling challenges that’s happening.”
