The Kiwi rose as much as 0.9 per cent on Tuesday following comments from New Zealand’s central bankers indicating more easing is on its way – but at a more moderate pace that investors expected.

There wasn’t much substantively new in the speech, written by governor Graeme Wheeler and delivered by assistant governor John McDermott in Dunedin on Tuesday.

Policymakers repeated that inflation was the main driver for the rate cut made earlier this month and flagged up the “trade off” between lower interest rates and higher asset prices:

Our decision to further lower the OCR does increase the potential risk of further fuelling increases in asset prices, including within the housing market. This is one of the difficult trade-offs that we have had to confront. The risks here are partly balanced by our macro-prudential policy moves that will further boost the resilience of the banking system.

It may sound trivial for central banks to note that they will closely monitor the emerging economic data, but that is the reality of the situation in a world where there are major uncertainties and every indicator of growth and inflation is carefully scrutinised….It is this emerging economic data that will determine whether the assumed 35 basis points of further easing is realistic or whether more or less monetary stimulus will be required.

We do not believe that the outlook and balance of risks warrants a position of no policy change, nor a position of rapid easings.

The New Zealand dollar rose 0.8 per cent on the comments to NZ$0.7325 against the US dollar, before rising further in afternoon trading to hit NZ$0.7333. That was the biggest intraday gain in a week, and the highest level since August 11.

The RBNZ has cut rates six times since the beginning of 2015. Its current cash rate is 2 per cent, a record low.

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