RBNZ seen easing further in the next months – UOB

Strategist at UOB Group Lee Sue Ann has assessed the recent decision by the RBNZ to take the benchmark rate to a record low of 2.0%.

Key Quotes

“As we expected, the Reserve Bank of New Zealand (RBNZ) cut interest rates by 25bps at the conclusion of its August monetary policy meeting, taking the cash rate to a record-low level of 2.0%. Signaling that further easing would likely be required, Governor Graeme Wheeler said “Global growth is below trend despite being supported by unprecedented levels of monetary stimulus…current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range”.

“The RBNZ’s 90-day bank bill track, which serves as a guide to where the central bank board thinks interest rates will be in the future, suggests there will be one more 25bps cut by early 2017. We think the RBNZ will have no choice but to ease more than is currently priced in. The RBNZ has two more meetings for 2016: 22 September and 10 November. We see the central bank easing again before the end of the year, and then again in the first half of 2017”.