RBNZ: OCR cut by 50bps – ANZ

Sharon Zollner, chief economist at ANZ, notes that the RBNZ today cut the OCR 50bp to 1.00%, but the market and analysts were unanimous regarding a cut today, but no one was picking -50bp.

Key Quotes

“The forward OCR track was also much lower than expected and signals clearly that the door is open to further cuts from here. We expect another cut in November, but depending on the data flow it could come as early as September. The market response was as dramatic as the RBNZ could have hoped, with both the currency and rates sharply lower.”

“The RBNZ noted that the outlook for both global and domestic growth had deteriorated, and has revised down its growth forecasts markedly. However, it continues to forecast a stronger lift in activity over the next year than we do, driven by investment, construction, and government spending. That said, the Committee didn’t sound fully confident that this would actually eventuate: “The members discussed that if sentiment remained low, perhaps due to global economic conditions or if profitability remains squeezed, growth might not increase as anticipated over the medium term”.”

“Although the move today was bigger than anyone expected, the door was left open to more. The OCR is forecast to trough at 0.91%, implying a better than even chance of a further cut – we forecast it to come in November.”