RBNZ Assistant Governor Christian Hawkesby said in a Bloomberg interview that the central bank has a “genuine neutral bias” on rates, and “a genuine openness about where things go from here.” For now, “we can stay on hold, keep rates low for a long time”.
Regarding the impact of China’s coronavirus outbreak, disruptions to New Zealand economy could last just six weeks and save only 0.3% off Q1 growth. “If things are a lot worse, then the projections will look different and the policy response will look different,” he said. “At the moment the markets are probably more relaxed than they were earlier in the month. But equally we know that it’s asymmetric. If the median is six weeks it can’t be a whole lot shorter than that but it could be quite a lot longer.”
On the idea of rate hike, RBNZ is currently adopting a wait and see approached. He said, “When you’re in a period when there is no spare capacity left and we haven’t had inflation below target for a long time then you are in an environment where it’s safer to start lifting interest rates. We’re not close to that time. We’ve still got a long period when we can wait and watch.”
