RBNZ likely to cut OCR further next year

The key upcoming event in New Zealand is the Reserve Bank's OCR Review on Thursday. The outcome shouldn't surprise anybody - RBNZ Governor Graeme Wheeler's speech two weeks ago included a dress rehearsal for the OCR Review.

As per the speech, the accompanying commentary will reinstate house prices as an item of direct concern for monetary policy, and will note the run of more positive recent data including rising dairy prices.

The policy guidance paragraph will certainly include a repeat of the phrase "Some further easing seems likely". However, the RBNZ's easing bias will be qualified and tempered by other sentences suggesting that the RBNZ wants to reduce the OCR cautiously and not too far.

"The RBNZ is expected to cut the OCR further next year, to 2.0%. The RBNZ does not currently share our view - in fact, the RBNZ has made it quite clear that it sees 2.5% as the most likely low-point for the OCR. It is more likely that this difference of opinion will be resolved next year than this year", added Westpac.