RBNZ: OCR reductions warrented – Westpac

By FXStreet FXStreet (Guatemala) – Imre Speizer,explained that they expect the RBNZ to keep the OCR on hold at 2.50% at Thursday’s OCR Review, but to shift from a conditional easing bias to an unconditional one. NZ swap rates and the NZD should fall slightly in response.

Key Quotes:

“The OCR Review announcement comprises a one page press release only. The key message for markets will be in the final paragraph , which is usually reserved for the policy outlook.

In December, that outlook was expressed as: “We expect to achieve this at current interest rate settings, although the Bank will reduce rates if circumstances warrant. We will continue to watch closely the emerging flow of economic data.”

Circumstances have indeed changed, and in our view it is now clear that further OCR reductions are warranted. We expect the RBNZ will indicate a greater likelihood of OCR reductions, expressed as something like : ”The OCR is expected to remain at or below the current level for some time.” This would indicate the RBNZ’s readiness to ease without committing it to any course of action. We assign a 50% probability to this scenario, which should push the 2yr swap rate only 2bp lower, and NZD/USD only 25 …read more

Source:: FX Street