RBNZ OCR likely to reach 2% in this cycle

RBNZ wasn't inclined to cut the OCR again as soon as its 29 October review, and today's figures support the case for a pause this month. 

However, this week's speech by Governor Wheeler showed that the RBNZ remains reluctant to consider such a move, especially if the benefits are outweighed by the costs of further inflating the housing market. 

"But in order to return inflation to around 2% on a sustained basis, the RBNZ was expected to ultimately need to deliver more than the single OCR cut that remains in its projections. The OCR is likely to reach a low of 2% in this cycle", says Westpac.

The RBNZ's view is sceptical that a weaker New Zealand dollar will drive a sustained rise in inflation, but the RBNZ will probably need to see some evidence to the contrary before cutting further.

"Previously three consecutive OCR cuts were expected in December, January and March, now the view is that these will be staggered over December, March and June", added Westpac.