Much of the surprise came down to timing, but the decision to hold was only reached by four votes to three.
Hamish Pepper, head of multi-asset and global investments at Harbour Asset Management, said the market was left confused by the rate call, which seemed to run counter to the Reserve Bank’s (RBNZ) messaging between Monetary Policy Committee meetings.
“It’s a little interesting if you think of some of the communication we’ve had in recent weeks,” Pepper told the Herald.
Last month, Reserve Bank Governor Anna Breman, who voted today to keep rates on hold, said in a speech to a Dunedin audience that the bank expected the economic recovery to strengthen and broaden, reflecting a resilient export sector and gradual increase in household spending.
Meanwhile, Assistant Governor Karen Silk, in an interview with Bloomberg – also last month – talked of a rate hike in December but voted for a rate hike today.
“Unfortunately, I think we’ve probably got a situation now where it’s a little more confusing for the market and people who are following the RBNZ to know what to make of comments that come from either the Governor herself or from the Monetary Policy Committee members,” Pepper said.
“Overall though, there’s consistency in the narrative for that idea of further hikes but I think the delivery of this decision has created unnecessary volatility,” he said.
In its release, the Reserve Bank said committee members agreed on the overall outlook for inflation.
“However, members differed in how much weight they placed on various risks and the timing of the monetary policy response,” the bank’s statement said.
“The committee agreed that tighter monetary policy is likely to be required but remains conditional on the economic outlook.”
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
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