RBNZ’s OCR projections: On hold for a long time – Westpac

Imre Speizer, Research Analyst at Westpac, suggests that the RBNZ today probably completed its easing cycle by cutting the OCR from 2.0% to 1.75%.

Key Quotes

“It signalled a long period ahead on hold via its front-page statement language, where it overhauled its guidance paragraph to imply no further easing unless global conditions deteriorated.”

“That signal was reinforced by its new OCR projection which settles at 1.7% (see across). Unrounded, that implies an OCR anywhere between 1.65% and 1.74%, indicating in which direction global risks are seen to lie.”

“Interestingly, markets have interpreted the end of the easing cycle as an invitation to start pricing in rate hikes. By November 2017 there’s a 60% chance of a hike, and by March 2018 it’s 100% priced in. We disagree with such pricing, and would look at fading such, although will need to let the smoke clear in the US interest rate markets first.”