Rising Sentiment Points to New Zealand Rate Hold

  • Wednesday, February 8, 2017

The Reserve Bank of New Zealand is likely to hold rates and sound slightly hawkish at 9 a.m. NZDT on February 9.

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Although inflation remains below target, it has risen in recent months, and the RBNZ’s tone* has begun to reflect this growing optimism (momentum** 0.11). The RBNZ, it seems, sees the kiwi economy as on firmer footing than their Aussie neighbors, thus we expect a fairly modest policy statement with some hawkish highlights. All this suggests that if inflation continues to rise, the bank may seek to raise rates later this year or early 2018.

The Prattle Team

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* Prattle’s models are based on the historical relationship between central bank language and market reaction, which is used as the basis of evaluation for future communications. The scores are normalized around zero and range between -2 and 2, negative numbers indicating dovishness and positive numbers indicating hawkishness. Aggregate trend is the overall sentiment of the bank calculated using a LOESS fitting of trend using a 12-month window.

** Residual scores represent the tone of a communication compared to the rolling, 12-month average for that individual communication type or speaker. Raw scores represent the tone of a communication compared to the average of all communications. Momentum is the average of the last ten residual scores.

Disclaimer: the forecasts provided herein are based upon sources believed by Prattle Analytics, LLC D/B/A Prattle, to be reliable and to be developed from models which are generally accepted as methods for producing economic forecasts.

Prattle cannot guarantee the accuracy or completeness of the information upon which this Report and such forecasts are based. This Report does not purport to disclose any risks or benefits of entering into particular transactions and should not be construed as advice with regard to any specific investment or instance. The opinions and judgments expressed within this Report made as of this date are subject to change without notice.

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