RBNZ’s Conway: Fed rate cuts could drive up New Zealand Dollar, reduce inflation

Reserve Bank of New Zealand (RBNZ) Chief Economist Conway is expressing his take on the impact of the US Federal Reserve (Fed) interest rate cuts on inflation and the New Zealand Dollar.

Key quotes (via Bloomberg)

“If the Fed, for example, did start to cut toward the end of this year and we didn’t” then “that would show up first and foremost in the exchange rate.”

“The exchange rate would start to appreciate, which would bring down inflationary pressures. So then you have to think about what are the flow-on effects of that inflation, and would that mean that we would end up cutting more quickly than what we are currently considering?”

On rate cuts, “there’s a bit of wiggle room in there for us, I think in terms of charting our own course. But I think it’s limited.”