Created
: 2024.10.04
2024.10.04 22:45
We now expect more aggressive rate cuts from the RBNZ with growth under pressure. We see two 50bps cuts in Q4-2024, taking the OCR to 4.25% (4.75% prior) by end-2024. We maintain our view for 125bps of cuts in 2025, and see the OCR at 3% by end-2025 (3.5% prior). The RBNZ's concerns are now shifting towards growth, as inflation is expected to decline further, Standard Chartered's macro analysts Bader Al Sarraf and Nicholas Chia note.
"We now expect the Reserve Bank of New Zealand (RBNZ) to cut the Official Cash Rate by 50bps each in back-to-back meetings in October and November. This takes our end-2024 OCR forecast to 4.25% (4.75% prior). Inflation is now well-positioned to edge down within the 1-3% target band in coming prints. But, more importantly, the growth backdrop remains sluggish.
"We think this necessitates an aggressive RBNZ stance, as front-loading cuts would reduce the risk of prolonged economic malaise. Accordingly, our end-2025 OCR now shifts to 3.0% (3.5% prior). This sets a shorter and sharper path to neutral OCR, estimated between 3-3.5% by the RBNZ. We think the balance of risks is skewed towards more aggressive easing by the RBNZ, as poor economic momentum translates to a negative output gap, which exerts downward pressure on inflation."
"The RBNZ will likely emphasise the importance of acting swiftly to provide much-needed relief, as further delays could result in deeper economic contractions. Governor Orr acknowledged during the August meeting press conference that the committee discussed 50bps to start the easing cycle, but 25bps was seen as the consensus at the time. This was deemed a "low-risk start" by the RBNZ, further supporting the argument of shifting to 50bps cuts. We think the evolution of data since makes it easier for the RBNZ to justify shifting to 50bps cuts, as was the case in historical policy easing cycles."
Created
: 2024.10.04
Last updated
: 2024.10.04
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy