Hint of optimism in OCR announcement

New governor Graeme Wheeler said: “Market sentiment has improved from earlier in the year, suggesting the risks to the global outlook are more balanced. Domestically, GDP continues to expand at a modest pace. Housing market activity is increasing as expected, and repairs and reconstruction in Canterbury are boosting the construction sector.”

Mark Lister, of Craigs Investment Partners, who was confident earlier in the week that Wheeler would not tinker with the rate, said that was being taken as a sign that the RBNZ would not respond to calls for a drop in the OCR.

A drop in inflation below the RBNZ target band was taken a sign the OCR could drop but Wheeler appears to have shrugged that off. “While annual CPI inflation has fallen to 0.8%, the Bank continues to expect inflation to head back towards the middle of the target range. We will continue to monitor inflation indicators, such as pricing intention and inflation expectation data, closely over coming months.”

Lister said people could read into Wheeler’s statement that the next OCR move was likely to be up, although that was still some time off.  The Kiwi dollar lifted after the announcement.