RBNZ to keep the OCR on hold at 1.75% – Westpac

Imre Speizer, Research Analyst at Westpac, suggests that they expect the RBNZ to keep the OCR on hold at 1.75% at Thursday’s OCR Review, and to repeat the previous guidance and although this is market-neutral, but there’s a small risk of a dovish outcome.  

Key Quotes

“Developments since the August MPS have been slightly net negative relative to the RBNZ’s forecasts: lower house prices, and slightly lower GDP growth, mostly offset by a lower exchange rate and higher near term inflation.”

“We expect that the final paragraph of the one-page press release will be a repeat of the phrases that have been used more-or-less unchanged for the past five missives: “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.” There should be little market reaction to this.”

“Our dovish scenario (15% chance) would see the policy guidance paragraph changed to reflect the possibility the next change in the OCR could be either a cut or a hike. Concern would be expressed about cooler housing and stalled construction activity. In response, NZD/USD could fall by 1c and 2yr swap by 10bp.”

“A hawkish scenario (10% chance) is more difficult to construct, but would emphasise improving global economic conditions and rising confidence among major central banks. In response, NZD/USD could rise by 0.5c and 2yr swap by 5bp.”