"In such an environment, there is a need to return interest rates to more normal levels and the bank expects to begin this adjustment soon. We will undertake a comprehensive assessment of the outlook in the next Monetary Policy Statement in March when further information will be available."
- Graeme Wheeler, RBNZ Governor
It seems that amid the upcoming interest rate hike the RBNZ tries to push the kiwi as low as they can in order not to cause market turmoil, when interest rates will be actually increased. Otherwise, it is rather difficult to explain Graeme Wheeler's neutral comments.
The kiwi sank to 0.8142 against the buck, down from 0.8180 before Governor's speech. Even though Wheeler reiterated his pledge to start increasing interest rates soon, he also mentioned he requires more information in order to asses the economy's outlook in March, bolstering the case of March's rate hike. At the same time, he noticed the central bank is concerned about the exchange rate and does not believe it will remain sustainable in the long run. Stronger inflationary pressure and the hike of the interest rates that would accompany them will definitely send the kiwi higher, reducing the competitiveness of the nation's exports and import substitution industries. Wheeler also warned the growth is still unsustainable and keeping exchange rate stable is vital for any changes in monetary policy.
At the same time, the trade sector posted a significant surplus in December on the back of stronger demand from China. Statistics New Zealand said the trade surplus widened to $524 million, from $183 in November.
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