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RBNZ may shift to a neutral OCR outlook at its February Monetary Policy Statement – Westpac

Analysts at Westpac have updated their outlook of the Reserve Bank of New Zealand.

"The RBNZ may shift to a neutral OCR outlook at its February Monetary Policy Statement, after a wave of strong economic and housing data and the announcement of a sharp lift in government infrastructure spending. Labour market data and the developing coronavirus outbreak are key uncertainties that could change the outlook."

Key points

  • The RBNZ may shift to a neutral OCR outlook at the February MPS.
  • Previously, the RBNZ implied there was a 50/50 chance of an imminent OCR cut.
  • We think the RBNZ will shift to saying that it “expects to keep the OCR on hold but will react to the data as necessary”.
  • The RBNZ’s OCR forecast is likely to be flat at 1.0%, compared to the previous 0.9%.
  • Recent strong housing and economic data, as well as the announcement of a large increase in government infrastructure spending, will prompt the RBNZ’s change of stance.
  • This is all based on what we know to date. The coronavirus and data next week on the labour market and inflation expectations are key uncertainties that could change the outlook.

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