All eyes turn to Wheeler

Graeme Wheeler.
Graeme Wheeler.
A speech by Reserve Bank governor Graeme Wheeler to be published at 9am tomorrow makes a relatively light New Zealand data week a lot more interesting.

BNZ economist Doug Steel said speeches from the central bank's ''top brass'' had become part of the bank's communications arsenal these days.

Speeches from earlier in the year had been referred to as providing context to recent policy decisions.

''This is reason enough to pay attention on Wednesday.''

The speech followed last week's 0.25% cut in the official cash rate and provided an opportunity for Mr Wheeler to elaborate on the few paragraphs from the OCR review and/or comment on the market's reaction to it, he said.

While he was not aware of the topic, it would be no surprise if Mr Wheeler used the speech as something of a stocktake on all that had changed over recent months, with the currency very much included.

''We will be looking for any reinforcement of the key themes of the OCR review, such as the bank cutting interest rates on a softening economic outlook and current low inflation. And that some further easing seems likely.''

While there would be a focus on rate reductions and the potential for more, a watch would be kept for emphasis, if any, connected to the word ''some'' from last week's review, Mr Steel said.

There was a sense the Reserve Bank saw limits to how far it could cut the OCR, given the current inflation outlook.

Connected to that was the dollar, which had already fallen a long way, generating broad support to the economy as well as lifting the outlook for inflation.

It would also not surprise if Mr Wheeler discussed housing.

Even if housing was not directly covered in the speech, it might well feature in any question and answer session given the speech was being delivered in Tauranga, one of the many areas where there had been increasing anecdotal evidence of spillover from the hot housing markets, Mr Steel said.

For the limited data out this week, Friday's ANZ business survey would be the crux.

Last month, it came further off the boil and not just through agriculture.

Friday's results would add to the information set and whether there had been a response to the much-fallen exchange rate.

Timing and magnitude of the currency's support to the economy in general, as well as the direct pass through to inflation, would be important for Reserve Bank considerations over the coming year.

It would also be worth looking at Thursday's building consents figures, he said.

Despite a big correction in apartment consents in May to 115 from a chunky 467 in April, new dwelling consents managed to go sideways in the month to be up 2.2% on a year earlier.

''We're hoping for a decent gain in June but we're not holding our breath amid a flat trend and falls in Canterbury.''

Non- residential consents should maintain the recent good forward momentum, he said.

Overseas, focus would largely be on the United States with a Federal Open Market Committee meeting and also economic data later in the week.

ASB chief economist Nick Tuffley said there were also data releases for Australia, the United Kingdom and Europe scattered through the week.

The Federal meeting tomorrow was not expected to announce any change in policy.

''There is a risk of a September rate hike but we think it is more like the committee remains on hold until December.''

On Thursday, the second key US data of gross domestic product growth was likely to show the US economy had bounced back from its first-quarter weakness, he said.

The market was expecting GDP growth of around 2.5%.

Euro zone inflation rounded out the week in a busy week internationally, Mr Tuffley said.

Inflation seemed to have reached the bottom a few months ago and, as oil price falls and the fall in the euro fed into annual calculations, euro zone inflation should grind up later this year.

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