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RBNZ likely to leave OCR on hold at 1.00 pct next week, leave door open to further cuts: ANZ Research
The Reserve Bank of New Zealand (RBNZ) is expected to leave the Overnight Cash Rate (OCR) on hold at 1.00 percent at its monetary policy meeting next Wednesday, but leave the door open to further cuts, according to the latest report from ANZ Research.
The Bank will most likely want to let the dust settle a little following August’s surprise 50bp move, but with this pre-emptive Committee nothing is certain.
The central bank will reaffirm its willingness to cut further should the outlook warrant, but it will also want to assess how earlier stimulus is transmitting though the broader economy before moving again. On net, developments since the August MPS are unlikely to have been significant enough to move the dial for the RBNZ yet, the report added.
There’s plenty for the RBNZ to worry about, with downside risks having intensified in recent months. The Reserve Bank’s August 50bp cut hasn’t caused any discernible improvement in business or consumer confidence, or inflation expectations indicators. Since the August MPS:
That said, there are a few reasons the RBNZ will nonetheless probably feel comfortable sitting this one out for now, preferring to watch and wait:
"But looking ahead, we’re confident that an OCR of 1 percent will not be the low of this cycle. The weak global outlook, gloomy business activity picture, and changes to bank capital requirements are likely to add further headwinds that a lower OCR will need to try and offset. We continue to expect 25bp cuts in November, February, and May to take the OCR to 0.25 percent – around its useful limit," ANZ Research further commented in the report.