In the minutes of March BOJ meeting, some members emphasized the need to have the best communications to the markets.
To be more specific:
- “It was important for the BOJ to thoroughly explain to the public … that the economy had not yet reached a phase where it should consider the timing and measures of a so-called exit from monetary easing,”
- “While normalization, or a gradual reduction in the degree of monetary accommodation, could become a topic for consideration in the future, the BOJ needs to explain to markets that normalization … would be different from monetary tightening,”
One member warned of the risk of prolonging ultra loose monetary policy, on financial institutions:
- “There was a risk financial intermediation would be pulled back if the low-yield environment was further prolonged,”
And, one member expressed the concern of weakness in consumption recovery.
RBNZ to stand pat this week, likely throughout 2018 too
RBNZ is expected to keep the official cash rate unchanged at 1.75%.
According to a Reuters poll, all 16 economists surveyed expected RBNZ to stand pat this week. 14 economists expected RBNZ to hold throughout 2018. 8 forecasts RBNZ to hike by the end of Q3 2019.
Sluggish inflation is a key factor giving RBNZ room for not acting. CPI slowed deeply to 1.1% yoy in Q1, sitting near the lower end of the target band.
RBNZ Governor Adrian Orr also said after the release that “very benign inflation going forward without doubt, as we’ve forecast.”
He added that “what really matters is the confidence and expectation and belief that we are aiming for that midpoint of 2 percent all of the time.” And he pledged that “we are doggedly determined to aim for two percent, but the accuracy around…that is very limited.”