RBNZ’s last OCR easing factored-in, NZ businesses demand further easing

Some further easing from RBNZ in the OCR seems likely at this stage, adding this will depend on the emerging flow of economic data.

So let's have a glance on how has it reflected since the last rate cut and how does that set up the RBNZ for its decision later this month:

• NZD is gained about 1-3% against its major trading partners (AUD, CNY, and USD). The Fed surprised with unchanged rate and a dovish statement, for now a weak payrolls report has pushed back expectations of a hike further into 2016.
   
• Domestic data have been mixed - sentiment surveys remain weak
   
• Market concerns over China remain high but dairy prices saw the largest jump in five years at the last auction (Sep 15), though it was on diminishing supply but for now Fonterra's dairy products are struggling to produce
   
• The RBNZ released a staff paper estimating the nominal neutral 90 day bank bill rate to be 3.8-4.9% (the RBNZ's current estimate of neutral 90d rates is 4.5%).

The paper is seen by some as a signal that the RBNZ may be at or near the end of this cutting cycle. Rates are already 150 bps below neutral.