What is the market currently pricing in for the RBNZ's next policy move?
The market sees a move to negative rates next year for the RBNZ
The market pricing for negative rates is building after the RBNZ meeting last week reaffirmed that the central bank will do whatever it takes to bolster the economy, and that includes pursuing negative rates as they also moved to jawbone the kiwi lower.
Based on OIS pricing, the next move (25 bps worth) by the RBNZ is seen in April next year but that expectation may be brought forward should the coronavirus situation in the country prompt extended lockdown measures - especially for Auckland.
As of today, the market is pricing in close to 40 bps worth of rate cuts by July next year:
That clearly shows the bias that the market is looking at for the RBNZ moving forward, with the implied policy rate expected to be -0.14% from the current 0.25%.
More so for the New Zealand central bank, economists' forecasts and views matter much more than other major central banks. As such, the latest commentary by ANZ just cements the case that negative rates are coming and it could be sooner than expected.
If that is going to be the base case, then the kiwi is unlikely to find much reprieve moving forward as pricing becomes more aggressive - especially against the aussie.