RBNZ: 86% chance of another cut in November - Westpac

Imre Speizer, Research Analyst at Westpac, suggests that market pricing since the 11 August MPS has been fairly stable, currently implying an 86% chance of another cut in November.

Key Quotes

“September is considered unlikely (because the RBNZ said it favours moving on MPS dates, not at interim meetings) at only 20% priced. However the market will maintain some chance of a September easing while the NZD remains elevated, and will increase it if the NZD runs much higher.

The market’s expected terminal rate of 1.59% implies a 64% chance of a 1.5% OCR by mid-2017. That is not inconsistent with the RBNZ signalling it could cut to 1.5% if economic developments warrant it. Indeed, its 90d interest rate projection of 1.75% implies a 1.60% OCR (using a bank bill-OCR spread of 15bp), or even lower if a more marketbased spread is used.”