NZD traders - RBNZ monetary policy announcement due tomorrow - preview

Author: Eamonn Sheridan | Category: Central Banks

The Reserve Bank of New Zealand policy decision is due at 0200GMT on June 26. 

All 24 analysts in Bloomberg's expectations survey have an 'on hold' decision. Some are wary of a cut (BNZ, for example, say a rate cut is nevertheless a 'solid risk').

  • We expect the RBNZ to hold the OCR at 1.50% in June, but to acknowledge the risk profile and signal that the future direction of the OCR is likely downwards. 
  • This is only expected to be a temporary respite, with the OCR set to hit another record low of 1.25% in August so as to meet the RBNZ's inflation and labour market objectives under the Remit for the Monetary Policy Committee (the 'remit'). 
  • Nothing can be ruled out in the current juncture, but there remain a number of supports to the economic outlook that should generate sufficient inflationary pressure and keep employment sufficiently elevated as to prevent the OCR moving lower still. Absent a marked deterioration in global prospects, talk of the OCR heading towards zero (and potentially below it) and quantitative easing (QE) being required in NZ still appears a little premature.

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