Life is not easy for NZD bears – Commerzbank

There was no rate hike today. However, the RBNZ’s MPC shifted its expectation of future key rate developments to the upside. Further rate hikes are possible now. Probably not very many, but still: that makes rate cuts as early as next year unlikely.

The RBNZ remains sceptical whether the rate hikes implemented so far will be sufficient to return inflation into the target area (1% to 3%) on a sustainable basis. That is the qualitative difference between the inventors of direct inflation control and the majority of the other G10 central banks.

Anyone who believes – as we at Commerzbank Research do – that the recent period of inflation has catapulted us out of the low inflation environment of the 2010s and that we are facing permanent inflation pressure once again (as was the case in the 1990s for example) will prefer the RBNZ’s approach over that of the other G10 central banks. And they will consider the initial market reaction to the RBNZ decision to be too limited rather than excessive.

...and life is not easy for NZD bears in the fortified camps Compendium, Aquarium, Laudanum and Totorum.