RBNZ: OCR rate cuts brought forward to August - ANZ

ANZ analysts note that the Reserve Bank of New Zealand has surprised all punters by saying that “the more likely direction of our next OCR move is down” and the NZD, in response has dropped about a cent, and yields dropped sharply across the curve.

Key Quotes

“We have been saying since late last year that the next move in the OCR would be down, but the RBNZ has come around to our view sooner than we had anticipated. However, acknowledging that downside risks to the growth outlook imply downside risks to the OCR is one thing; actually cutting the OCR is another.”

“It is a line-ball call, but on balance we think the RBNZ will wait to see global and domestic risks manifest into something more concrete before actually cutting, in order to rule out the possibility of the unnecessary volatility in interest rates and exchange rates that a U-turn would engender.”

“We have therefore brought forward our OCR rate cuts by three months to August, November and February, giving the RBNZ one more Monetary Policy Statement, in May, to assess how things lie (and introduce the new policy committee members). But between now and then lie several key data releases, and a decent disappointment in any of them could result in a cut as soon as May.”