A couple more analyst comments to follow those posted earlier:


  • statement broadly in line with expectations
  • a note of added caution on the global environment coming through and contributing to a slight delay in when the RBNZ thinks it will eventually raise the OCR
  • The RBNZ tweaked the language detailing the OCR outlook (reintroducing the "next OCR move could be up or down"), but we see the shifts as keeping consistent with the RBNZ's ongoing neutral stance
  • In the media conference the Governor noted the risks of a cut have not increased.

ASB looking ahead:

  • We recently changed our view on the OCR outlook and expect the OCR to remain on hold at 1.75% until February 2021. A key influence on our view change was the likely impact of the RBNZ bank capital proposals on banking funding costs and the broader economy. The impact of the capital changes is set to filter through roughly at a time when the RBNZ would be expected to otherwise be tightening to reduce the monetary stimulus in the economy. Today's RBNZ Statement reinforces the 'lower for longer' view. However, both our and the RBNZ's OCR views are contingent on the economy regaining momentum over 2019. The strength (or otherwise) of the economy this year will be pivotal to whether the RBNZ remains on hold or does indeed cut the OCR (as flagged by market pricing).


  • The RBNZ lowered GDP and CPI projections as expected and was not controversial.
  • What was hawkish was the Bank pushing the first 25bp OCR increase from late 2020 to mid-2021, not removing it altogether.
  • The rate cut scenario was also diluted, where global growth disappointment would see the OCR lowered by 50bp.
  • Despite New Zealand's major trading partners (AUD, CNY and USD) starting the new year with a fresh cautious tone, the RBNZ held its ground. While claiming that the cash rate will be at 1.75% for longer, the forward guidance is still signaling that the next move remains up for the cash rate.
  • OIS has adjusted across the board: an August cut has been dialed down from a 50/50 risk to closer to 30%, and November from 70% to closer to 50/50.


Other posts re the RBNZ today: