Tag Archives: Interest Rate / Policy

* RBNZ official cash rate is at 0.25%, as expected

* QE, funding for loans is maintained

* RBNZ says impact of new housing rules to watch (Adds details, analyst comments)

WELLINGTON, April 14 (Reuters) – New Zealand’s central bank left all current policy settings unchanged on Wednesday, saying monetary stimulus should continue to ensure inflation and employment targets are met.

The Reserve Bank of New Zealand (RBNZ) also said it would take time to observe the impact of the new housing market measures and the gradual revival of tourism on its economic recovery.

It keeps the official cash interest rate (OCR) at a record low of 0.25%, while also continuing the NZ $ 100 billion ($ 70.55 billion) quantitative easing tool and the Funding for Lending Program (FLP), both introduced last year to support a market hit by the COVID-19 pandemic.

“There is no reason for the RBNZ today to deviate from the ‘wait and see’ and ‘least regrettable’ strategy, or to sway the market price for an OCR hike, with markets on-board with the RBNZ message that tightening remains. prospects are distant, “said Sharon Zollner, chief economist at ANZ.

The central bank cut its cash rate by 75 basis points in March last year and pledged not to change for 12 months, while also introducing quantitative easing to support the economy. A Reuters poll expects the RBNZ to keep interest rates on hold and keep other tools of easing unchanged.

The RBNZ said inflation will surge in the near future, even exceeding the 2% target midpoint due to supply chain disruptions and rising oil prices, but this is temporary.

It reiterates that the prospect remains “very uncertain” and that meeting its targets will take a lot of time and patience.

“The committee agrees that medium-term inflation and employment will likely remain below its delivery target in the absence of a prolonged monetary stimulus,” said RBNZ.

HOUSING FOCUS

Business sentiment has faded in recent months despite a tremendous rebound in economic activity following the COVID-19 lockdown, and the economy contracting in the last quarter of 2020.

But these losses are offset by improving global prospects, and the return of Australian tourists to New Zealand next week via the COVID-19 ‘travel bubble’ arrangement.

The government, under pressure to cool the hot housing market, also introduced a series of measures in March that saddled investors with new taxes.

The RBNZ committee said housing measures are likely to dampen price growth but the extent of their influence will take time to observe.

It is recognized that stimulating monetary policy played a role in lifting house prices, along with other factors.

The government last year tasked the central bank with considering the impact of its monetary and financial policy decisions on housing prices, a move to help calm heating markets.

$ 1 = 1.4174 New Zealand dollars Edited by Jacqueline Wong

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Italy

REFILE-UPDATE 2-Austria follows Italy as the government continues ultra-long issuance | Instant News

April 13, 2021 NewsDesk

(Clears repeating data about Austria)

* Austria will sell 50-year bonds, following Italy

* Spain will sell 15 year bonds

* Bond yields rise as investors digest the issuance

April 13 (Reuters) – Austria on Tuesday moved to lock in its current low borrowing costs with 50-year bonds, following a half-century issue from Italy, while Spain launched a 15-year newspaper.

Both deals are made through a syndicate of banks, with Austria to raise 1.75 billion euros and Spain six billion euros, according to a key manager’s memo seen by Reuters.

Last week’s Austrian and Italian bonds marked a resumption of a very long term, 50-year issuance.

After a strong start to the year with 50-year selling from France, Spain and Belgium, the bond selloff was driven by higher growth expectations and inflation weighed on bond buyers with losses and such issuance eased.

“European investors still rely on a lower narrative for the long term and therefore there is no fear on their part to buy longer term bonds as there is no fear of regime change in growth and inflation dynamics,” said Antoine Bouvet, senior pricing strategist. on ING.

“It is true that tariffs have moved higher, but in the grand scheme of things, they are still quite low.”

The European Central Bank has calmed the market by increasing its rate of asset purchases.

Ultra-long-dated bonds are considered to be one of the most risky government debt problems, because they are more sensitive to changes in the underlying interest rates. In addition, the ECB, which is pushing down euro area borrowing costs, has not bought bonds of more than 30 years.

Austria saw demand 13 billion euros and Spain 42 billion euros as both books shrank after the government cut offered yields.

That’s well below the 65 billion euros in offers Madrid received for a 50-year contract in February and 18 billion euros for Austria’s 100-year bonds last year.

Bouvet said the lower demand may descend to a large increase in yields this year meaning investors such as pension funds will no longer need to buy longer-term bonds. Some governments are also trying to get rid of bidders they believe will deliver an increased order

Euro area bond yields barely moved as data showed US inflation rose 2.6% year-on-year in March, slightly above forecasts.

But massive supplies weighed on the market, with German 10-year yields almost hitting a two-week high of -0.271% and Italian 10-year yields at their highest in more than a month at 0.78%.

Investors also digested the supply of bonds from the Netherlands, Italy, the UK and the sale of $ 24 billion worth of US 30-year bonds, all of which were sold at auction.

Reporting by Yoruk Bahceli; Edited by Catherine Evans, Alexandra Hudson and Giles Elgood

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Germany

UPDATE 1-German investor morale fell in April on lockdown fears, said ZEW | Instant News

April 13, 2021 NewsDesk

(Adding analyst, context)

BERLIN, April 13 (Reuters) – Investor sentiment in Germany fell unexpectedly in April, the ZEW economic research institute said on Tuesday, citing growing concerns that private consumption could be depressed as Europe’s biggest economy got closer to extending lockdown measures.

ZEW said the investor’s economic sentiment survey fell to 70.7 points, the first drop since November 2020, from 76.6 the previous month. A Reuters poll forecasted the increase to be 79.0.

“Financial market experts are somewhat less euphoric than the previous month,” said ZEW President Achim Wambach in a statement. “The ZEW economic sentiment indicator, however, is still at a very high level and the current situation is considered much more positive than in March.”

Germany tightened lockdown measures in December to fight a third wave of coronavirus infections and the economy is expected to shrink in the first three months of this year.

Hopes for a return to growth in the second quarter have been tempered by expectations that restrictive measures will be extended beyond mid-April to stop an exponential rise in infections.

“The ZEW indicator is preparing us for another delay of the anticipated economic recovery,” said Thomas Gitzel, chief economist at VP Bank Group. “The limitation on gross domestic product growth in the second quarter is too high. The ZEW headline tells us that the bar must be lowered. “

Economists earlier this year predicted German growth of 3% based on expectations of a slow return to normal economic activity.

The ZEW gauge for current conditions rose to -48.8 points from -61.0 the previous month, confirming an assessment that the German economy remains in relatively good shape as increasing demand for goods from China and the United States keeps factories humming.

“Concerns about a tighter lockdown have led to lower expectations for private consumption,” said Wambach. However, the export prospects are better than the previous month. (Written by Joseph Nasr; editing by Maria Sheahan, Larry King)

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Brazil

The prospect of Brazil’s 2021 interest rate rising to 5.25%, the survey showed | Instant News

April 12, 2021 NewsDesk

BRASILIA, April 12 (Reuters) – The prospect of Brazil’s 2021 interest rate rising to 5.25%, the central bank’s survey of economists published on Monday showed, after repeated comments by policymakers that aggressive tightening now means borrowing costs won’t rise as much as in the end. .

The median estimate for Selic’s benchmark interest rate of more than 100 economists in the central bank’s weekly ‘FOCUS’ survey increased from 5.00% the previous week, and 4.50% four weeks ago.

Central bank chief Roberto Campos Neto said more than once last week that an advance rate hike meant there was no need to raise that much, and that the bank’s ‘partial normalization’ policy meant Selic would not move up to his neutral level until next year.

Figures showing inflation rose above 6% in March “solidified” another 75 basis point rate hike to 3.50% in May, a repeat of the first rate hike in last month’s tightening cycle, he said.

The ‘FOCUS’ survey on Monday also showed economists’ average year-end inflation forecast edged up to 4.9% from 4.8%, even further above the central bank’s goal of 3.75%.

Economists’ Selic 2022 forecast was unchanged at 6.00%, and their 2023 outlook was unchanged at 6.50%, the survey showed.

With the second wave of the deadly COVID-19 pandemic hitting the country, the outlook for Brazil’s economic growth in 2021 has dimmed slightly for the sixth week in a row to 3.1% from 3.2%. The year-end forecast for the exchange rate also slipped for a third week to 5.37 reais per dollar from 5.35, the survey showed.

$ 1 = 5.68 reais Reported by Jamie McGeever; Edited by Paul Simao

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New Zealand

Cenbank NZ will stand tall as it assesses the resumption of travel, property restrictions | Instant News

April 12, 2021 NewsDesk

WELLINGTON (Reuters) – New Zealand’s central bank is expected to leave interest rates and its quantitative easing program unchanged this week as it assesses the economic impact of some returning international tourists and the government’s new housing market measures.

FILE PHOTOS: A security guard stands at the main entrance of the Reserve Bank of New Zealand located in central Wellington, New Zealand, July 3, 2017. Image taken July 3, 2017. REUTERS / David Gray

In a Reuters poll, all 11 economists expected the Reserve Bank of New Zealand (RBNZ) to stay on Wednesday, and expect to keep the official rate (OCR) at a historic low of 0.25% for the rest of the year.

Only three interest rates are expected to be raised after the second half of next year.

Business sentiment has faded in recent months despite a tremendous rebound in economic activity following the COVID-19 lockdown, and the economy contracting in the last quarter of 2020.

But these losses are offset by improving global prospects, and the return of Australian tourists to New Zealand next week via the COVID-19 ‘travel bubble’ arrangement.

“We expect no change in monetary policy setting at the outlook next Wednesday, with the OCR held at 0.25% for the foreseeable future,” said Westpac economist Michael Gordon.

“The latest news on the domestic economy is weaker than expected, but this is offset by the rapidly improving global outlook and growing concerns about cost and price pressures,” he said.

The central bank cut interest rates by 75 basis points in March last year and vowed to keep them unchanged for 12 months, while also introducing quantitative easing to support economies hit by border closings and coronavirus lockdowns.

But the faster economic recovery and worries about a burning property market supported by historically low interest rates have led markets to speculate that the easing cycle is over, and a rate hike may come sooner than expected.

Under political pressure to cool the housing market, Prime Minister Jacinda Ardern introduced a series of measures that burden investors with new taxes.

Analysts expect the RBNZ to postpone any short-term policy action until assessing the impact of the new property cooling measures on the economy.

“The housing market is an important driver of the current economic momentum, so housing developments have a significant impact on the OCR outlook,” said ANZ economist Sharon Zollner.

Reporting by Praveen Menon; edited by Shri Navaratnam

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