Flash: Market still pricing 75 bp RBNZ hike next 12 months - BNZ

FXstreet.com (Barcelona) - Despite the sharp decline in the NZD/USD exchange rate, Craig Ebert, Economist at the Bank of New Zealand, "expect the RBNZ will probably downplay this fact, as it appears intent on keeping the OCR very low for as long as it possibly can, almost regardless of the facts and risks that confront it."

In view of Ebert, "If the market believed the Bank’s 90-day bank bill track, implying no hikes until Q3 of 2014, then short-term retail interest rates would fall back a chunk. Instead the markets are stopping this by pricing 75 basis points of OCR tightening over the coming 12 months that the RBNZ simply has not signalled." Ebert notes "It’s a big difference, but one that we’ve maintained for a while now." Tomorrow’s QSBO (Quarterly Survey of Business Opinion), will help "to further validate our case for less-loose OCR policy" Ebert said.