RBNZ Scenario Analysis via Westpac

Summarised from Westpac NZ client note:

We expect the RBNZ to keep the OCR on hold at 1.75%

  • But to issue slightly more dovish policy guidance

Developments since the May MPS have been net negative relative to the RBNZ's forecasts:

weaker GDP, inflation, house prices, and a higher NZD;

  • only partly offset by stronger export prices, fiscal policy and migration.

We expect the OCR forecast to be flattened (removing the rise in early 2020) but the policy guidance paragraph to be largely unchanged: "Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly."

This is probably close to the market's expected outcome, and forms our neutral scenario (a 65% chance of occurring, we think).

  • In response ... (fall) NZD/USD 1/2c or less

Our dovish scenario (30% chance) takes the form of a flattened and lowered OCR forecast, from 1.8% to 1.7%

  • A commensurate tweaking of the guidance language could be the attachment of: "either up or down" to the end of the final sentence. In response ... NZD/USD (fall) up to 2c

Our hawkish scenario (5% chance) takes the form of an unchanged OCR forecast and largely unchanged guidance language. Markets would be disappointed ... (rise of) NZD/USD around 1c


The Reserve Bank of New Zealand announcement is due at 2100GMT Wednesday 9 August 2017. Which is 9am NZ time on Thursday.

More previews:

RBNZ this week could see it "ramp up its currency warning"

Nomura on RBNZ and Kiwi

Preview RBNZ rate decision & statement

RBNZ meet this week - the 'shadow board' recommends leaving OCR on hold