RBNZ: September is live, November is more likely - Westpac

Imre Speizer, Research Analyst at Westpac, notes that in its Monetary Policy Statement (MPS), the RBNZ reduced the OCR by 25bp to 2.0% and retained a strong easing bias, signalling one more cut to come.

Key Quotes

“That signal was given both textually and via the RBNZ’s interest rate projection.

The 90-day interest rate projection fell from 2.12% to 1.75% at the two-year ahead point. That is consistent with a projection that the OCR’s terminal rate during this easing cycle will be either 1.5% or 1.75%. Using a market current spread of around 25bp, then a 1.50% OCR is implied, whereas a more conservative 15bp assumption gives 1.60%.

Overall the impression is of one more OCR cut in the bag, with a chance of another but it’s not promised.

That’s about what market pricing implies – a 100% chance of a cut to 1.75% and a 56% chance of another to 1.50%.

Regarding the timing of the next cut, while September is live, November is more likely given the RBNZ’s preference for moving on MPS dates.”