New Zealand: RBNZ to cut in March and May – Standard Chartered

Strategists at Standard Chartered Bank expect the reserve Bank of New Zealand (RBNZ) to cut the official cash rate by 25bps each in March and May as the dovish wave sweeping global central banks on coronavirus fears may pressure RBNZ to cut.

Key quotes

“We now see RBNZ cutting the official cash rate by 25bps each in March and May, versus our previous call of no change in 2020.”

“This change in our policy rate call is prompted by the likely coordinated global monetary policy easing following the meeting of G7 finance ministers and central bank governors, the fact that the coronavirus outbreak seems to be more widespread and protracted than previously expected and the start of the decline in inflation expectations and business confidence.”

“Furthermore, with elections this year, we expect fiscal stimulus to be more supportive of growth.”

“Yield differentials could turn more supportive for NZD-USD short-term. However, we expect the NZD to underperform G10 safe havens such as JPY and CHF, given concerns about the growth outlook and weak risk sentiment.”