RBNZ: Governor Wheeler did not seriously considered 50bp move - BBH

Research Team at BBH, notes that Reserve Bank of New Zealand delivered a 25 bp cut in the cash rate, and the New Zealand dollar rallied.

Key Quotes

“It shot up from near $0.7200 to $0.7340 in less than five minutes.  It has since trended lower, and ahead of the start of the North American session, it is trading near $0.7240.

Not only was the rate cut widely anticipated, but in recent days, there was talk of the chances of a 50 bp rate cut.  The derivatives market appeared to discount about a 20% chance of a 50 bp move, which Governor Wheeler indicated he did not seriously consider. 

The RBNZ's path for the 90-day bill implies a trough in the official cash rate of 1.50-1.75% rather than 2% previously. This is a little above what the market prices implied.  Still, officials made it clear that the strength of the currency was a challenge.  By suggesting that the inflation target is more important than ever, it points market participants to data that they must pay particular attention to going forward.”