RBNZ: Ready reckoner for September meet - Westpac

Dominick Stephens, Research Analyst at Westpac, lists down the Ready Reckoner which quantifies the impact of the various shocks that have hit the New Zealand economy since the last Monetary Policy Statement, in terms of the likely impact on the RBNZ’s Official Cash Rate forecast.

Key Quotes

“The sensitivities represent our best estimate of how the RBNZ’s models will treat the various data surprises.

• August MPS implied OCR forecast (Q3 2019): 1.9%
• Net impact of shocks since August: -15bp
• Ready Reckoner estimate of new OCR forecast (Q3 2019): 1.75%”

“Near-term inflation: +10bp

September quarter inflation is shaping up to be 0.5%, compared to the RBNZ's forecast of 0.2%. However, the difference is due to transitory factors, and is therefore has only a small impact on the Ready Reckoner.”

“Near-term GDP: -10bp

March quarter GDP growth was revised up from 0.5% to 0.6%. June quarter was 0.8% compared to the RBNZ's forecast of 0.9%. And we assume that the RBNZ will revise down its forecast of September quarter GDP growth due to recent weak construction data. The balance of these changes would be a small downgrade to the RBNZ's assessment of economic activity.”

“Exchange rate: +15bp

The trade-weighted index has been running about 1.5% below the August MPS assumption.” 

“House prices: -30bp

In the August MPS, the RBNZ forecast that house prices would rise 3.2% over the six months to September 2017. The latest data suggests that house prices have instead fallen by 1.5%.”

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“Total change: -15bp”