RBNZ: to hike in early 2019 - Nomura

Analysts at Nomura noted that the Reserve Bank of New Zealand (RBNZ) today announced an unchanged cash rate, at 1.75%, as was uniformly expected. 

Key Quotes:

"It also repeated its open-ended conclusion that policy will remain unchanged for a “considerable period”, with “numerous uncertainties” meaning that “policy may need to adjust accordingly”. Its updated forecasts – which now incorporate a preliminary assessment of the impact of new government policies in several areas – show a slightly weaker GDP profile but a higher inflation path over the next 18 months, with lower trade-weighted index forecasts, and the official cash rate estimated to rise a fraction in Q2 of 2019, from Q3 previously. 

We continue to think the RBNZ (like the RBA) will exercise patience on the policy front, and we continue to forecast an RBNZ rate hike in early 2019. It appears that some market participants were expecting a more dovish turn from the RBNZ; combined with some reduction in concern regarding the level of the (now lower)NZD and a short base from leveraged funds, this has sent NZD (and NZ rates) a little higher in immediate reaction."