No Kiwi Interest Rate Cut Till 2Q07

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By Terry Hughes

As was widely expected, the RBNZ left interest rates unchanged, but given the accompanying statements its seems unlikely the rate cut cycle will begin until the second quarter of 2007, TD Securities says.

Although the RBNZ remaining of the view that inflation is likely to remain high in the near term, and with "some economic indicators more resilient than expected," chief strategist Stephen Koukoulas points out the tone seems a little more dovish, with predictions of a return to the inflation target band of 1-3% expected by late 2007.

This opens up the possibility of a rate cut over the first half of 2007, he says, and CommBank economist Daniel Wills agrees. He expects to see a rate cut in March 2007, although he concedes that the chances this may get "pushed out to the June quarter are increasing."

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