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RBNZ: Next Move Equally Balanced

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The Reserve Bank of New Zealand released a statement after their meeting, which stated that they held the Official Cash Rate (OCR) steady at 1.75%, and that "the direction of our next move is equally balanced, up or down."

The reaction was swift and powerful. Note however that the move was reversed with the US CPI miss in the next US session.

The reason for their concern was a lack of inflation.

consumer price inflation remains below the 2 percent mid-point of our target due, in part, to recent low food and import price inflation, and subdued wage pressures.

On the positive side, they see an unprecedented rise in employment among numerous labor groups. They also expect business investment to rise:

Business investment should also increase due to emerging capacity constraints. The emerging capacity constraints are projected to see New Zealand’s consumer price inflation gradually rise to our 2 percent annual target.

So from here watch for rising inflation, especially from food, imports, and wages. Also lack of business investment may put them on the defensive.

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