The Reserve Bank of New Zealand took markets by surprise overnight after cutting the benchmark interest rate from 3.50% to 3.25%. This marks the first interest rate cut since 2011 when the Central Bank cut from 3.00% to 2.50% before hiking again in 2014. However, in the subsequent statement, RBNZ Governor Graeme Wheeler cited the weakness in dairy prices and rising fuel prices as the reason behind the latest policy shift. Taking into account these factors coupled with slowing growth in Australia and China, the RBNZ thinks that further interest rate cuts might also prove appropriate depending on how the situation unfolds and how inflation responds to the latest modification of monetary policy. To the South, Australian unemployment managed to show surprising gains overnight, with the rate falling to 6.00% from 6.10% in the prior period. The AUDNZD pair has soared on the data, rising over 300 pips in the last twelve hours.
New Zealand Eases Policy
Daily Analysis - 11/06/2015