RBNZ likely to keep rate unchanged next week

The Reserve Bank of New Zealand, in January, had lowered the OCR below 2.5%. However, the timing of cuts continues to be in question. A weak global outlook, continued softness in inflation expectations and inflation, and weakness in dairy prices indicate that there is a strong case for lower the rates. Nevertheless, the central bank's statements in recent weeks indicated that they are not in a hurry to lower rates.

This shows that they are worried about reigniting Auckland's housing market pressures. Also, it indicates their concerns about their focus on ensuring medium-term stability in exchange rate, output and prices. The RBNZ is expected to keep the rates on hold in next week.

But it is expected to give a strong signal for further rate cuts in the coming months. However, with the degree of softness in inflation and worries regarding the outlook, next week's interest rate review and April decision both should be looked as possible dates for cuts in OCR.