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RBNZ: Little need to tweak the OCR track - Westpac

According to Imre Speizer, Research Analyst at Westpac, New Zealand economy’s overall, developments since the August MPS are slightly net positive relative to the RBNZ’s forecasts: lower house prices and GDP growth are more than offset by the lower exchange rate and higher near term inflation. However, the latter will be seen as transitory, leaving the RBNZ with little need to tweak the OCR track, he further adds.

Key Quotes

“We expect that the policy paragraph will be a repeat of the phrases that have been used more-or-less unchanged for the past six meetings: “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.”

“An unchanged OCR track and an unchanged policy paragraph (a 70% chance we think) should elicit little market reaction.”

“Our dovish scenario (20% chance) has the OCR track decreased by a modest 10bp. In response, NZD/USD could fall by 0.75c and the 2yr swap rate by 5bp.”

“A hawkish scenario (10% chance) has the OCR track increased by a modest 10bp. In response, NZD/USD could rise by 1.25c and the 2yr swap rate by 8bp.”

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