RBNZ: Market fully prices a 25bps cut - BNZ

Kymberly Martin, Senior Market Strategist at BNZ, now anticipates that the RBNZ will cut the OCR to 1.50% by year-end (previously 1.75%).

Key Quotes

“We see 25bps cuts at the August, September and November meetings.

Heading into Thursday’s RBNZ meeting the market fully prices a 25bps cut. So unless the Bank pulls a 50bps cut out of the hat (not impossible, but highly unlikely in our view), any market response will be a result of the Bank’s indications of future action.

The market currently prices around a 1.62% trough in the OCR within the year ahead. So the Bank will need to imply more cuts than this (through its updated 90-day bank bill track or discussion of ‘risks’) for yields to dip further on the meeting. There are always challenges in nuancing a message. The risk is the market views the Bank’s intentions as less dovish than current market pricing, and yields bounce off their lows. However, this would simply set up a renewed receiving opportunity in our view.”