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RBNZ likely to keep OCR unchanged at November MPS, forecast to be unchanged from August: Westpac Research

The Reserve Bank of New Zealand (RBNZ) is expected to keep the Overnight Cash Rate (OCR) on hold at its monetary policy meeting this week and deliver a statement similar to its September OCR Review, according to the latest report from Westpac Research.

That basically said that the outlook for monetary policy has not changed recently, although the risks are still tilted to the downside. The interest rate reductions delivered so far were starting to work their way through.

And consequently interest rates were on pause for now, but there is scope to ease monetary further should that prove necessary. This would also be very similar to the Reserve Bank of Australia statement delivered this week, the report added.

The central bank gave no forward guidance in its August Monetary Policy Statement, and the OCR forecast bottomed out at 0.9 percent, implying only a 50/50 chance of another OCR cut at some point over the following year.

At the September OCR review, the RBNZ stated that “new information since the August Monetary Policy Statement did not warrant a significant change to the monetary policy outlook”.

In addition, global financial market sentiment has improved, and US and Australian central banks are suggesting that they have cut rates far enough for now. Putting all of this together, our analysis suggests that the RBNZ’s OCR forecast will be unchanged relative to August, bottoming out at 0.9 percent.

"Consequently, we expect that the RBNZ can stick to its previous course and keep the OCR on hold, while acknowledging that the risks are skewed towards lower rates," Westpac Research further commented in the report.

By Debarati Bir
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