RBNZ: Next OCR move is down - ANZ

Analysts at ANZ point out that the RBNZ today held the OCR at 1.75% as expected, but it now believes that “the more likely direction of our next OCR move is down.”

Key Quotes

“Upside inflation risks still warranted a passing mention, but were soundly trumped by domestic and global downside risks to growth. We concur.”

“The Reserve Bank is not under pressure to cut the OCR right away. Growth has dipped but is still respectable. Commodity prices are holding up well, so the pass-through from global woes is muted so far. The labour market is clearly tight, supporting household spending. And inflation is gradually tracking towards where it needs to be as previous strong capacity stretch feeds through. The RBNZ has time to see how developments unfold.”

“However, the economy has been undershooting the RBNZ’s forecasts, and acceleration this year now seems very unlikely, as was implicitly acknowledged in today’s Review.”

“We continue to forecast that the next OCR move is down, but the risk is now that it comes earlier than our forecast of November, given the RBNZ’s tone has shifted to be overtly dovish a little earlier than we thought it might. Like the RBNZ, we’ll be watching both the domestic and global dataflow closely.”