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Is the RBNZ calling time on pandemic policy?

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(Kitco News) - The main story from the RBNZ is the fact that the rate forecasts have now shifted toward a 25bps hike in September 2022. In addition to this, the projections are now showing that 1.75% could be likely by June 2024. Is the RBNZ about to call time on pandemic policy?. 

Sharon Zollner, ANZ’s chief economist for New Zealand stated “The Reserve Bank of New Zealand is calling time,”. She also noted “Demand is clearly outstripping supply in parts of the economy, causing inflation pressure, although tourism continues to struggle. “Given downside risks and challenges, the bank still believes that ongoing strong stimulus is necessary, but no longer indefinitely,” she added.

First and foremost it is important to note that there were no policy changes overnight and the bank kept interest rates at 0.25% and the two stimulus programs the LSAP (Large scale asset purchase program) and FLP (Funding for Lending) held steady as economic outlook still uncertain.

In terms of some numbers, annual GDP is projected to be at 3.9% through late 2022. Better-than-expected labor data was cited in the RBNZ’s projections, with Q1 unemployment falling to 4.7% from 4.9% in the prior quarter and wage rates increasing to 1.6%. 

The central bank is now less dovish as the economic outlook is improving as Covid-19 vaccinations increase globally. It also said that meeting the RBNZ's official inflation and employment targets will "necessitate considerable time and patience.". 

Looking at the 4-hour chart below you can see there was a big spike last night. The technicals worked pretty well as the price stopped at the blue resistance zone that had been tested on the chart two times already. If the price manages to break and hold above that level bulls may be able to take the price to the next green resistance zone at 0.7464. 

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