What to watch for in the RBNZ
The RBNZ decision is at 2100 GMT and none of the 21 economists surveyed by Bloomberg expects any kind of a move. Even through year-end, the odds of a cut are only 6%.
Here's Lloyds on the decision later:
The RBNZ is expected to leave interest rates unchanged this evening. Following a deterioration in the economic growth environment, RBNZ Governor Orr suggested the next move "may be a cut", sparking a 'dovish' reaction in the market. Changes to the central bank's forecasts or further comments from Governor Orr will be closely watched for signs of a further 'dovish' shift
Adrian Orr said he sees the ORC remaining at 1.75% for "some time to come" in the latest MPS statement while including a line that "our next move is equally balanced, up or down."
The statement is likely to be similar but forecast projections in the OCR will be closely watched. The current forecast is for hitting the 2% inflation in Dec 2020. If that's moved forward, it will pull hikes forward as well and boost the kiwi.
On the downside, business confidence is softening and global trade isn't exactly rosy. That could mean lower GDP forecasts which would be a hint about lower rates.
TD says the market is looking for something more dovish and a neutral statement could lend support to the kiwi, because they don't think the RBNZ has any intention of cutting rates.
"We don't think talk of a rate cut is appropriate as wage and inflation pressures are (finally) increasing, even if growth is slowing. We also remain of the view that economic growth should be broad-based and not rely on housing (households do not need incentive to pile on more debt). Finally, borrowing costs are not an impediment for business, and a rate cut is highly unlikely to reverse the slump in business confidence," they write.
