RBNZ less dovish on rates than expected, favours lower NZ$

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Reserve Bank of New Zealand NZ 796 Assistant Governor John McDermott said on Thursday that the central bank was "slightly more uncomfortable" with the level of the NZ dollar than it was in May. "Numerous uncertainties remain and policy may need to adjust accordingly", Mr Wheeler said in a statement. New Zealand's economy over the last five years grew on average at about 3% a year - above trend - while employment growth of 3% a year had also been above trend, Wheeler said. The bank maintained its forecast that rates won't rise until the third quarter of 2019, and lowered its projections for inflation.

Given all that - and let's also give him points for inflation at least being in the lower part of the band rather than the higher part - would Wheeler have taken this situation by the time of his last press conference if it had been offered to him five years ago?

The currency nevertheless rose after the statement to trade at 73.51 US cents at 12:27 p.m.in Wellington. As noted in the accompanying statement, "monetary policy will remain accommodative for a considerable period". The front fell off many commodity markets.

All 11 economists surveyed by Bloomberg expected today's decision, and most forecast the benchmark rate will remain at 1.75 percent for another year.

WELLINGTON, Aug 10 (Reuters) - The Reserve Bank of New Zealand stuck firmly to its neutral stance on Thursday, saying there was no need to cut rates given a likely pick-up in inflation and appeared to be less anxious about the country's strong currency than some expected. "House price inflation come down from 15 percent to just over two percent at this point, and core inflation running at around 1.5 percent", he said.

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Consumer Price inflation averaged 0.9 percent over his five year term and rose over that 2.0 percent midpoint for just one of the 18 quarters he was in charge. New Zealand's terms of trade were at a 40-year high, oil prices were over US$100 a barrel, whole milk powder prices very high, the market was pricing in OCR tightening and the International Monetary Fund was forecasting a positive output gap (as was the RBNZ).

While New Zealand's economy has been expanding at a healthy clip the past several years, supported by immigration and booming tourism and construction, growth fell short of expectations in the fourth quarter of 2016 and the first quarter of 2017.

According to RBNZ policy makers, global economic growth increased and became more broad-based but wage growth subdued due to surplus capacity.

The New Zealand dollar was little changed against the greenback after the announcement. Annual house-price growth slowed to 2.8 percent in June from 5 percent in May and 10 percent in March, the Real Estate Institute of New Zealand said last month.

Reserve Bank Governor Graeme Wheeler was both positive and defiant during the final press conference of his five-year term. "This moderation is expected to persist, although there remains a risk of resurgence in prices given continued strong population growth and resource constraints in the construction sector".

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