RBNZ: Dicing with financial stability - TDS
Annette Beacher, Chief Asia-Pacific Macro Strategist at TD Securities, notes that the New Zealand’s July housing credit was upbeat, with new commitments up 15%/y, albeit flattered by a poor July 2017.
Key Quotes
“The commensurate leap in high LVR (>80%) loans could threaten future financial stability. 'Speed limits' were eased again from 1 Jan, and supply and demand for such loans have jumped accordingly, with ratios now the highest since Oct 2013 (when limits were first introduced).”
“RBNZ Governor Orr at his post-MPS press conference noted that the Bank could be "looking at LVRs", and while a throwaway line this is significant, as the RBNZ tends to tie LVR tweaks to house price cycles.”
“Healthy mortgage growth via high LVR loans should mitigate any appetite for OCR cuts, even if inflation is lingering below target for too long.”
“We remain more constructive on the economy than the RBNZ and consensus, even though we recently pushed back the timing of the first OCR hike to November 2019.”
“While CFTC net shorts are near extremes for the NZD, we cannot see the NZD breaching the 50d MA of $US0.675 with the RBNZ talking up the risk of a rate cut at each opportunity (including on the sidelines in Jackson Hole).”
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