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Expect RBNZ to cut 25bps of OCR by March 2016 - BNZ

FXStreet (Delhi) – Kymberly Martin, Senior Market Strategist at BNZ, suggests that after last week’s Q3 CPI confirmed that inflation is very low, but bottoming, the market continues to price that the OCR will be cut to 2.45% by mid next year.

Key Quotes

“It looks for the RBNZ to cut a further 25bps by the March meeting next year, assigning a small chance of a further cut thereafter. By contrast, we believe if the RBNZ is going to cut further it will likely want to get on with it. We assign close to a 50/50 chance of a cut next week, but see a cut by year-end as extremely probable.”

“However, we see the RBNZ as maintaining a very high hurdle to cutting the OCR below 2.50%. This was confirmed in its speech last week. It emphasised that it was not sure rate cuts would necessarily spur investment, growth or inflation but could risk further fuelling the overheating housing market.”

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