RBNZ: 25bp or 50bp rate cut on cards? – BAML

FXStreet (Mumbai) – Strategists at BAML argues over 25bp or 50bp rate cut by RBNZ’s at its monetary policy decision due tomorrow, further noting that 50bp rate cut looks distant.

Key Quotes:

“While most, including our economists, expect a 25bp cut, rumblings of a “front-loaded” 50bp cut have increased. The most compelling argument for this is if the RBNZ is certain it needs to cut rates further this year, why wait?”

“Moreover, we think it is unlikely the RBNZ’s forward guidance will be materially strengthened.”

“In June, the statement said “further easing may be appropriate. This will depend on the emerging data.” This seems appropriate for now; why would the RBNZ want to suggest rate cuts are inevitable, as recent market commentary suggests, rather than data dependent?”

“Market speculation of a potential change in the RBNZ’s FX language was fanned earlier this week by Prime Minister John Key stating the NZD had fallen faster than expected.”

“While this of course does not necessarily represent the view of the RBNZ, it did raise questions about the appetite of policymakers for further FX depreciation.“

“In our view, the PM’s broader remarks suggested he was primarily pushing back against the increasingly pessimistic outlook for New Zealand, rather than suggesting a view the NZD has fallen “enough”.

Strategists at BAML argues over 25bp or 50bp rate cut by RBNZ’s at its monetary policy decision due tomorrow, further noting that 50bp rate cut looks distant.

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