2 Dec 2015
NZD: RBNZ expected to cut rates in its forthcoming meet – BNZ
FXStreet (Delhi) – Kymberly Martin, Senior Market Strategist at BNZ, suggests that the research house’s central view remains for a cut at the RBNZ’s 10 December meeting, taking the cash rate to a 2.50% cyclical trough.
Key Quotes
“Data showing NZ net migration remains at historic highs will not be lost on the RBNZ. But the implications for monetary policy are not clear. A persistently stronger than expected trend adds upside risks to GDP growth forecast. It also adds to the demand side of supply demand imbalances in the housing market, contributing to house price inflation pressures. However, it also suggests that immigration may more than satisfy employment growth, resulting in a rising unemployment rate, and/or contained wage pressures. Solid GDP growth, heady house price appreciation, but a rising unemployment rate would not lend itself to a simple monetary policy solution.”
“The market prices a 50% chance of a December cut but a 2.41% trough in the OCR by mid next year. Pricing for next year is a fair representation of current risks, but we maintain that the RBNZ has a very high hurdle to cutting below 2.50%. It would prefer to keep some powder dry in the event of a severe global shock, or negative domestic development, such as the harsh impact from the current El Nino weather pattern.”
Key Quotes
“Data showing NZ net migration remains at historic highs will not be lost on the RBNZ. But the implications for monetary policy are not clear. A persistently stronger than expected trend adds upside risks to GDP growth forecast. It also adds to the demand side of supply demand imbalances in the housing market, contributing to house price inflation pressures. However, it also suggests that immigration may more than satisfy employment growth, resulting in a rising unemployment rate, and/or contained wage pressures. Solid GDP growth, heady house price appreciation, but a rising unemployment rate would not lend itself to a simple monetary policy solution.”
“The market prices a 50% chance of a December cut but a 2.41% trough in the OCR by mid next year. Pricing for next year is a fair representation of current risks, but we maintain that the RBNZ has a very high hurdle to cutting below 2.50%. It would prefer to keep some powder dry in the event of a severe global shock, or negative domestic development, such as the harsh impact from the current El Nino weather pattern.”