January 08 OCR review: OCR on hold at 8.25%

As everyone expected the OCR is unchanged at 8.25%.  The statement was decidedly neutral, stating that everything is happening inline with their December forecasts, however uncertainty has increased.  As they did not state whether it is downside or upside risk they are concerned about (we cannot just presume it is downside risk), any change in their hawkish stance in December relies on our belief of the risk preference of the Bank.

If the RBNZ is risk averse, then they are less likely to lift rates in the future, if they are risk neutral they are just as likely to lift rates in the future.

It is important to note that they said they will be monitoring commodity prices – this implies that the ANZ commodity price index will be especially important over the coming months.