RBNZ: Market thinks Aug rate cut has a 72% chance - Westpac

Imre Speizer, Senior Market Strategist at Westpac, suggests that the market pricing for the OCR currently implies a 72% chance of a cut in August, compared to around 45% before the UK vote.

Key Quotes

“Such a reassessment is correct in our view Last week we would have said the chances were only around 55%, but we now see them closer to 80%. That is because the trade-weighted exchange rate is now stronger (6% above the RBNZ’s latest forecast), offshore funding spreads are higher, and global financial and economic conditions are weaker.

Domestically, while the economic activity remains strong, there are early signs the pace may be slowing. Migration data last week endorsed our view the cycle has peaked (in monthly growth terms), and consumer confidence and employment confidence softened.”