The New Zealand Dollar is tumbling following a surprise 50bps rate-cut by RBNZ (economists had forecast 25bps) to 1.00%, citing downside risks on inflation and jobs.
Mimiccing The Fed's apparent lack of data-dependence, this surprise rate-cut followed a strong 3.9% unemployment print; and just like The Fed, RBNZ is clear that global trade issues are an important factor:
"Heightened uncertainty and declining international trade have contributed to lower trading-partner growth."
Some key quotes from the statement here:
“GDP growth has slowed over the past year and growth headwinds are rising,” the central bank said in a statement.
“In the absence of additional monetary stimulus, employment and inflation would likely ease relative to our targets.”
“Our actions today demonstrate our ongoing commitment to ensure inflation increases to the mid-point of the target range, and employment remains around its maximum sustainable level.”
Kiwi has plunged...
Near its weakest level against the dollar since Jan 2015...
And 10Y Kiwi note yields plunged 17bps to a record low 1.128%!
Clearly the central bank is trying to get ahead of the curve of global easing and as Bloomberg's Garfield Reynolds notes, RBNZ obviously decided they didn't dare risk any sort of bounce in the kiwi if they followed the Fed's playbook and made a so-called hawkish cut. The currency had ticked up into the decision to offer the board a warning about the perils of insufficient action.
Here's the take from Kyle Rodda, analyst at IG Markets in Melbourne.
“This was not what the market was expecting at all, it’s a shock to many. Considering the data isn’t terrible for New Zealand at all, this is an example of a central bank that’s looking beyond current data and trying to get ahead of the global slowdown.”
They also secured themselves a weaker currency even if the Fed finds itself pushed toward further rate cuts.
Additionally, this brings RBNZ's policy rate in line with RBA's rate...