RBNZ: Market pricing 80% chance of Nov cut, then end - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the market pricing for a November OCR cut has been very stable during the past three weeks at slightly more than 80%.

Key Quotes

“However the market now views any further easing beyond Nov as a zero chance, and is now instead pricing in some chance of tightening during the year ahead. We don’t expect any such tightening, rather a lengthy period on hold.

The RBNZ should signal that on Thursday via its MPS, which will unveil a new OCR projection. The projection plus its guidance sentence should tell us where it sees the OCR during the year ahead. The challenge for the RBNZ will be to signal a lengthy pause but not necessarily an end to the easing cycle. If the market concludes the easing cycle is over, it will price in tightening (markets eschew pricing in stability) and push the NZD higher.”