Analysts at Westpac offer their thoughts on the market expectations from the Reserve Bank of New Zealand (RBNZ) on its monetary policy.
Key Quotes:
“Increasingly rocky global conditions have reinforced our expectations that economic conditions in New Zealand are going to get worse before they get better. Business confidence surveys have reflected that, with last week’s survey also indicating a fall inflation expectations.
This fall is very important in terms of the outlook for monetary policy, and was referenced by RBNZ Governor Orr as well as other Bank officials as a key factor underpinning August’s rate cut. The recent downshift in expectations means that the uphill battle the RBNZ has been fighting to generate a sustained lift in inflation has now gotten that much harder.
The next update on expectations will be the RBNZ’s own Survey of Expectations on 12 Nov (only one day before the Nov policy decision but the RBNZ gets the results about a week before it’s released publicly).
This survey could again have a big impact on the Monetary Policy Committee’s thinking, just as it did in August. It will certainly be a key event for markets to watch ahead of the Nov policy statement and could impact market pricing. We expect the RBNZ will cut the cash rate by 25bps in November, taking it to a fresh record low of 0.75%.”
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