RBNZ: Market pricing for the OCR rebounded last week – Westpac

By FXStreet Imre Speizer, Senior Market Strategist at Westpac, suggests that the market pricing for the RBNZ OCR rebounded last week after some strong housing data.

Key Quotes

“In addition, the RBNZ disappointed market expectations new house-lending restrictions would be announced in the FSR (Financial Stability Report). Currently, the chances of a June OCR cut are priced at 50%, while August is seen as an 80% chance.

Last week’s FSR put the run-up in debt (both households and dairy sectors) firmly front and centre. While no new lending restrictions were announced, the RBNZ is clearly mulling over its options. That’s no surprise given rampant credit growth and ongoing broad-based strength in the housing market. We think the RBNZ will feel compelled to leave the sidelines and impose further lending restrictions on banks before the year is out.

Looking ahead to this week, attention will be focused on the RBNZ’s survey of inflation expectations. The sharp fall last quarter was an important catalyst for the RBNZ’s March rate cut. We don’t expect to see a similar sized drop this quarter. Firmer oil prices are being reflected at the petrol pump, adding to the upward pressure on inflation in the near-term.”
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Source:: FX Street