The Reserve Bank of New Zealand held a monetary policy meeting today, where it surprised investors by deciding to keep the interest rate unchanged at 0.25%, while the markets had expected an interest rate hike to 0.5%.
The RBNZ’s decision is most likely motivated by fears of a new wave of coronavirus infections in the island country. Just yesterday New Zealand announced it will be entering a three-day lockdown due to a single confirmed case - presumably of the highly contagious Delta variant.
There have been a couple of more cases confirmed since then, and considering the high transmission rate of this Covid-19 variant, more will likely come in the coming days, which may be why the central bank has chosen to err on the side of caution.
The United Kingdom, a country that has been lauded as a Covid-19 success story, is also still continuing to see over 20,000 new coronavirus cases per day, but deaths and hospitalizations remain low.
Today the UK published three inflation rates for July, which were all worse than anticipated. The United Kingdom has not entered any new lockdowns despite the arrival of the Delta variant, but many people infected with the virus, or those who have been in contact with someone positive for Covid-19, were instructed to self-isolate, which is limiting economic activity to a certain extent.
The European Union also delivered its own inflation numbers for July, but all reports met the forecasts perfectly.
Yet another country to publish inflation reports today is Canada, where core inflation met the forecast while YoY inflation was higher than expected, pleasing investors.
Later today we await the minutes from the Federal Reserve’s most recent monetary policy meeting. Many will look to these minutes as prep for next week’s economic symposium at Jackson Hole, where it is expected that the Federal Reserve will announce an unwinding of its asset purchases. However, if the minutes indicate that the FOMC did not discuss that issue yet, it will lower the chances that Jerome Powell will make any hawkish commitments this soon.
As for the stock market, today US stock indices will open lower once again due to the coronavirus-related pessimism on the global market.
Chinese stock indices are also performing poorly due to indications that the Chinese government is looking to implement more new regulations against the country’s richest businesses.
