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NZD/USD Drops Below 0.82 as RBNZ Signals Rates Pause

New Zealand’s central bank signaled it will keep interest rates on hold for longer as it lowered inflation forecasts and repeated calls for a weaker currency, sending the kiwi dollar to a seven-month low.

“It is prudent to undertake a period of monitoring and assessment before considering further policy adjustment,” Governor Graeme Wheeler said in Wellington after keeping the official cash rate at 3.5 percent, which is among the highest in the developed world. The Reserve Bank of New Zealand lowered its 90-day bank bill rate forecast, suggesting borrowing costs won’t rise again until the first half of 2015.

“This monetary policy statement was much more ‘dovish’ than we anticipated,” said Dominick Stephens, chief economist at Westpac Banking Corp. in New Zealand, who flagged he will push out his forecast for the next rate increase. “The RBNZ appears to have re-thought its inflation forecast in light of recent very soft inflation outcomes.”

Bloomberg [1]

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