Key highlights of the week ended March 25

Note: This section contains information in English only.
Source: Dukascopy Bank SA
New Zealand
Earlier this month the Reserve Bank of New Zealand slashed the official cash rate to a record-low 2.25% as dairy prices were continuing to fall and it seemed longer for inflation to reach the central bank's 1-3% target range. Most economists expect the RBNZ to cut the interest rates once more this year, following up its surprise cut to a record-low 2.25% with another by June. However, ASB's economist team is now predicting two more OCR cuts this year, forecasting that the RBNZ will not meet its inflation target otherwise as the effect of the RBNZ's cut earlier this month has not been fully passed on to borrowers and the New Zealand Dollar has since appreciated.

Euro zone
German business confidence strengthened for the first time in four months, in a sign that domestic demand is shielding German companies from sluggish global growth. The Ifo institute's business climate index climbed to 106.7 in March, up from 105.7 in the preceding month. German businesses have increased their dependence on domestic demand as a China-driven downturn in emerging markets curtails exports. At the same time, the ZEW Center for European Research in Mannheim reported its index of investor expectations, which aims to predict economic developments in the coming six months, surged to 4.3 in March from 1 in the previous month. The gauge rebounded from a 16-month low after market turmoil calmed and the European Central Bank launched fresh monetary stimulus. 

Japan
Japan's consumer inflation remained flat in the year to February as low energy costs and weak consumption restrained price growth, keeping the Bank of Japan under pressure to introduce additional stimulus even after easing policy less than two months ago. A separate BoJ index, which strips out the effects of energy and fresh food prices, showed consumer inflation at 1.1% in the year to February, unchanged from January. Core consumer prices in Tokyo, a leading indicator of nationwide prices, recorded the biggest annual decline in nearly three years in March, suggesting that inflation will remain tepid amid weak demand as the world's third-largest economy stands on the edge of recession. The core CPI for the Tokyo metropolitan area slid 0.3% in March, after declining 0.1% in February. The data reinforces a dominant market opinion that the central bank will be forced to cut its inflation forecasts and push back the timing for reaching its 2% price target at a quarterly review of its projections next month. 

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