RBNZ: More than a 90% chance of an 11 August cut - BNZ

Kymberly Martin, Senior Market Strategist at BNZ, suggests that the RBNZ’s economic update provided the impetus for lower NZ yields across the curve.

Key Quotes

“In its late-scheduled updated the Bank made very clear that monetary policy will be very firmly directed at the pursuit of getting CPI inflation back to target i.e. not distracted by housing market concerns. It made specific reference to the fact the NZ TWI sits 6% higher than its projections as of the June MPS. It specifically referenced the scenario outlined in that MPS that suggested the OCR could be cut below 1% if the NZ TWI simply failed to fall from its June level.

Yesterday’s statement’s final paragraph included; “it seems likely that further policy easing will be required”. This was a notch more direct than at the June statement. The market was prompt to ratchet up pricing of rate cuts. It now prices more than a 90% chance of an 11 August cut and around a 1.70% trough in the OCR in the year ahead. This seems a fair representation of current risks.”