RBNZ to hold OCR at 2.75% in October OCR review

The OCR is expected to remain on hold at 2.75% in the October OCR review. The strong housing market and a less dire outlook for dairy prices favour a pause; however, the bounce in the NZ dollar will be a concern for the RBNZ's inflation forecasts. In a recent speech the RBNZ Governor noted that: "Recent economic indicators have been more encouraging. Some further easing in the OCR seems likely but this will continue to depend on the emerging flow of economic data." 

"We suspect the speech was a dry run for the OCR review, and that this language will be repeated in the statement. The RBNZ's current plan appears to be for only one more cut in this cycle. In contrast, we are forecasting three further cuts, in December, March and June", notes Westpac Research.