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Source: ONE News -
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While the language may have changed slightly, the message to come out of the Reserve Bank's Official Cash rate review today is pretty much the same as it was six weeks ago.
Interest rate hikes are coming in New Zealand, but just when? Well this still remains a little unclear. Reading between the lines from today's statement , it could still be as early as June, or even as late as September.
Now when announcing his decision today to leave interest rates on hold again at 2.5%, Allan Bollard said the Bank expects to begin removing monetary policy stimulus over the "coming months".
This is a change from the previous statement when he indicated hikes would be around the 'middle of the year'.
Initially one could be tempted to try to interpret the wording change as a major change in stance.
However as economist Robin Clements at UBS was quick to note, the middle of the year is now just around the corner.
Hiking in June or July as the market has been pricing, is very much consistent with the line 'coming months'.
So really when you think about it, there is little change in sentiment in today's statement from the last, as far as the timing issue goes....
So why the language change?
Perhaps it's just a stronger reminder to Kiwis not to forget that rate hikes will happen...after all it's been about two and half years since the last time rates went up.
The phrase 'coming months', also still gives Dr Bollard plenty of wriggle room and will allow him to properly assess crucial unemployment data due next month.
Interestingly Dr Bollard also notes in his statement that future interest hikes are not likely to be as aggressive as previous cycles, perhaps a sign that increases of 25 basis points are the likely norm.
This is put down to retail banks already charging higher interest rates and the fact growing numbers of Kiwis are on floating rates rather than long term fixed rates.
Those on floating rates feel interest rate hikes immediately so this trend gives the OCR far more bang for its buck.
What was also significant today was the acknowledgement from Dr Bollard that the economy is seeing some good export earnings via strong demand out of Asia and other key trading partners.
Just this week of course we learnt the forestry industry has seen 125% growth in log exports this year, while Fonterra upped its payout level and indicated another strong year next year.
However offsetting that is also the acknowledgement that risks to the global economy are elevated.
By this, one assumes he means the Greek sovereign debt crisis.
But also backing up today's decision to hold again, is the fact that Kiwis are NOT bingeing on credit and the housing market is quiet.
Inflation too is behaving and is tracking right in the middle of the target band according to Dr Bollard.
All things considered, New Zealand as Macquarie Private Wealth recently put it - is hitting a sweet spot at the moment.
While the rising dollar and international market wobbles in Europe are still a threat, it seems as though we are getting a reasonably balanced recovery that is led by exports, rather than just consumption and over borrowing.
Whether this balanced recovery can last is unclear, although you can bet the governor will be doing his best to ensure it does.
And when looking at the strength of the Kiwi dollar over the last few days in the face of some steep market pull-backs - it makes one wonder if the rest of the world is also starting to view New Zealand as finally being on the right path.
