RBNZ unanimously expected to leave the OCR unchanged at 1.75% - TDS

The RBNZ is unanimously expected to leave the Official Cash Rate (OCR) at 1.75% next Thursday August 10, according to the research team at TDS.

Key Quotes

“The Bank will also release updated GDP and CPI projections with its quarterly Monetary Policy Statement, and more crucially, its OCR projections. Unlike the sticker-shock market event of May 11, we expect Governor Wheeler’s swansong to sink without trace.”

“Since May, consumer and business sentiment remain strong, activity data have been solid if not strong, while price-related data have disappointed. Today’s Jun qtr labour market report saw the unemployment rate slip to an eight-year low of 4.8%, but only via the participation rate slump masking an unexpected slide in employment. Dairy prices underwhelmed again overnight and let’s not forget that Q2 CPI was flat, against RBNZ expectations of +0.3%/qtr.”

“The soft and hard data updates support RBNZ Governor Wheeler maintaining his long-held neutral stance, allowing him to repeat next week that the OCR was going to remain at 1.75% for a very (very) long time.”

“An unchanged OCR at 1.75% next week is unanimous consensus and reflected in the OIS strip. After the flat CPI print, and today’s underwhelming employment report, pricing for our February 2018 hike base case has morphed from 50% priced to barely 20% priced.”