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Preview - No Rate Change Expected from RBNZ
In a busy week for central banks, Reserve Bank of New Zealand is next in line for a rate decision this afternoon. Much like its Aussie counterpart, the Kiwi bank is fully expected to stay on hold at 8.25%. A Bloomberg survey of economists from some of the largest banks was in fact unanimous in that assessment, with polling results attached below. After four consecutive 25bp hikes earlier this year, the last one coming in July, New Zealand interest rates have remained at 8.25% - a sufficiently high level that fanned the rise of the Kiwi Dollar to a spot of greatest relative strength among the major currencies. And despite some rather vocal opposition to appreciating currency by the central bank, a tight labor market and persisting inflationary pressures have demanded a hawkish stance. Most recent employment figure for Q3 reported last month shows a record low of 3.5%, the lowest since the measure was adopted in 1986. Meanwhile, the latest inflation measures such as FPI ad PPI released last month have also ticked up and remain uncomfortably high. Furthermore, according to RBNZ survey of business managers, inflation expectations for the last quarter of 2007 have risen to 3.0% - the ceiling of the central bank's comfort zone. Last time, RBNZ agreed that inflation remained a problem, and markets will tune in again for hints of whether those concerns have been further supplemented by those dealing with currency appreciation and the potential negative impact of high interest rates on the slowing housing sector.