RBNZ: Expect an OCR cut in August - ANZ

Research Team at ANZ, expect an OCR cut in August, with the RBNZ signalling that further monetary policy easing is in the offering to offset the deflationary impact of TWI strength, and that the housing boom will primarily be dealt with via macro-prudential policy.

Key Quotes

“Short-end market pricing seems fair and is in line with our forecasts. At face value that leaves us neutral, but with the risk profile skewed downward (courtesy of weaker global growth and political uncertainty) and the onus on the RBNZ to front foot easing, we expect the short end to continue grinding lower.

Local interest rates remain high by global comparison, and we view yield convergence as a necessary condition to avert TWI strength. Ahead of at least two more OCR cuts, we expect to see more curve-flattening.”