NZ: Core view for an RBNZ rate cut in November - BNZ

Kymberly Martin, Senior Market Strategist at BNZ, notes that the RBNZ left its OCR at 2.0% yesterday, but confirmed its easing bias by leaving its final statement unchanged; “Our current projections and assumptions indicate that further policy easing will be required”.

Key Quotes

“The RBNZ could not avoid acknowledging recent positive domestic developments but, notably, it downplayed these. Equally the global backdrop was still seen as “uncertain”, including the outlook for global growth, commodity prices and the political environment.

Inflation is seen as being held down by negative tradables inflation but the Bank expects a rise from the December quarter. However, the Bank still sees negative risks to inflation expectations. It has previously highlighted these expectations are crucial to its policy making process.

All up the statement left us comfortable with our core view for an RBNZ rate cut in November, with a further cut in February being a line ball call. The market now prices almost a 70% chance of a November cut and a 1.66% trough in the OCR, from its current level of 2.0%.”