A Surprise Interest Rate Cut from New Zealand
July 23, 2008
No, the Federal Reserve did not cut interest, but one central bank did - the RBNZ, which is short for the Reserve Bank of New Zealand.
For the first time in 5 years, the Reserve Bank of New Zealand cut interest rates by 25bp to 8 percent and signaled that rates will be cut even further.
Going into the meeting, the futures curve was pricing in 5 rate cuts over the next 12 months and this is the first of the five.
The New Zealand economy has been struggling for the past month with retail sales falling by the most in 4 years and consumer confidence hitting record lows. The New Zealand is at risk of hitting a recession.
The dovish comments from RBNZ Governor Bollard will keep the currency under water for some time. Expect the New Zealand dollar to particularly under perform currencies whose central banks are still holding onto tight monetary policies - like the Euro!
Source: eSignal
Posted in New Zealand dollar, reserve bank of new zealand
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July 23rd, 2008 at 7:00 pm
May I know which futures curve are you talking about here Kathy? If possible, please provide with the Bloomberg ticker. Thanks!
July 24th, 2008 at 10:26 am
use SA Enter
or CSS1YRBNZ Index
July 24th, 2008 at 11:25 am
[...] Reserve Bank of New Zealand cut interest rates last night for the first time in 5 years. With retail sales falling by the most in 4 years and consumer confidence hitting record lows, the [...]
August 6th, 2008 at 10:03 am
I have an 8 mo CD in New Zealand earning 8.76% APY. It comes up in Oct. Since the currency has dropped so much to the US dollar, I’m now underwater. Do you think it wise to keep it there in another CD (i’ll still probably get 7.5%+) and just ride out the currency wave until it comes back to Feb 08 rates? Or should I take my money back to the US Dollar and quit while I’m only a little behind?