New Zealand: RBNZ cuts by 75bps – Standard Chartered

The Reserve Bank of New Zealand (RBNZ) cuts the official cash rate. The NZD has been broadly unchanged since the 13 March close, as economists at Standard Chartered Bank note. NZD/USD trades at 0.6017.

Key quotes

“RBNZ surprised with an intermeeting cut of 75bps, bringing the official cash rate (OCR) to 0.25% from 1% previously.”

“The central bank said the OCR will remain at this level for the next 12 months and that should any further stimulus be required, it will come in the form of a Large Scale Asset Purchase (LSAP) programme of government bonds rather than further OCR cuts.”

“The NZD has been broadly unchanged since the 13 March close, despite the RBNZ’s 75bps emergency rate cut, as the market was already pricing substantial easing.”

“We expect the NZD to find support versus the USD, after taking significant losses YTD, as aggressive Fed easing turns yield differentials in its favour.” 

“We expect the weak growth outlook and risk sentiment to continue to weigh on the currency, which is likely to continue to underperform low yielding G10 peers like the JPY, CHF and EUR.”