RBNZ kept Official Cash Rate unchanged at 0.25% today, instead of raising it. The decision was “made in the context of the Government’s imposition of Level 4 COVID restrictions on activity across New Zealand.” Nevertheless, it reiterated that the “least regrets policy stance” was still to “further reduce the level of monetary stimulus”. But the Committee agreed to stand pat at this meeting “given the heightened uncertainty with the country in a lockdown.”
In the summary record, it’s also noted that committee members “now had more confidence that rising capacity pressures will feed through into inflation, and that employment is at its maximum sustainable level.” They concluded that “they could continue removing monetary stimulus”, following haling the LSAP program in July.
NZD/USD spiked lower to 0.6867 after the announcement but quickly recovered. Outlook stays bearish as long as 0.7087 resistance holds. Sustained break of 0.6879 support will extend the fall from 0.7463 to 38.2% retracement of 0.5467 to 0.7463 at 0.6701.
