Published: Thu, August 08, 2019
Markets | By Erika Turner

RBNZ Poised to Cut Rates Again, May Signal More to Come

RBNZ Poised to Cut Rates Again, May Signal More to Come

Last night also saw the publication of the New Zealand Global Dairy Trade Price Index which fell below forecast from 2.7% to -2.6%. The measure spiked to 15.62% which is the fourth highest reading of the year and more than double its average over the last 12 months.

Reserve Bank of New Zealand Governor Adrian Orr said, "Global economic activity continues to weaken". Followed by the reveal of a 50-basis point interest rate cut of RBNZ, missing analysts' estimate were expecting a rate-cut of 25-basis point, Kiwi dollar tumbled 2.02 percent immediately to $0.6398 during the late-midday Asia-Pacific trading hours, a level never seen since January 16th, 2016.

The New Zealand dollar tumbled one per cent against the U.S. dollar to 64.43 United States cents - a 10-month low.

This stifled investors and sent the Aussie dollar right back to levels not experienced since March 2009 when the Global Financial Crisis kicked into gear, Westpac senior currency strategist Sean Callow said. Orr signaled further easing could be possible and even hinted at non-conventional policy as the global outlook darkens amid a worsening economic conflict between the USA and China.

The committee drove home its dovish message by predicting there was no chance of a hike until late 2021, a lower for longer outlook that was also recently adopted by the Reserve Bank of Australia (RBA).

The Australian dollar took another battering on Wednesday afternoon because most economists had only expected the Reserve Bank of New Zealand to cut rates by 25 basis points, or 0.25 percentage points.

It is becoming overwhelmingly evident that central banks in the G10 are genuinely concerned about the potential negative impact global trade tensions could have on their respective economies.

DEVELOPING: Stocks Bounce Back After 'China Blinks' on Trade War with US
ENERGY: Benchmark U.S. crude rose 32 cents to $55.01 per barrel in electronic trading on the New York Mercantile Exchange. Nervous central banks around the world are slashing interest rates in a bid to blunt the pain from the tariff battle.

The aggressive move comes just days after the Trump administration labeled China a currency manipulator in a dramatic escalation of the Sino-U.S. trade war.

The Reserve Bank of Australia cut interest rates in June and July, by a quarter of a percentage point each time, taking the cash rate to a record low of one per cent.

"In the absence of additional monetary stimulus, employment and inflation would likely ease relative to our targets", the bank said in a statement.

The Japanese currency rose 0.2% to 106.27, although that was still some way from levels seen on Monday when the escalating U.S. Business and consumer confidence have also sunk, painting a gloomy outlook.

"We still expect the dollar to rise to 7.35 yuan by the end of the year, which will make the USA administration very uncomfortable".

Some economists, however, had started calling for a rate cut after several central banks, including the Fed, eased policy in recent weeks to stimulate economic growth.

Like this: