RBNZ: 80% chance of a cut in November - Westpac

Imre Speizer, Research Analyst at Westpac, suggests that the NZ monetary policy Market pricing since the 11 August MPS has been fairly stable, currently implying an 80% chance of a cut in November.

Key Quotes

“September is considered very unlikely (because the RBNZ said it favours moving on MPS dates, not at interim meetings) at only 13% priced. That’s not to say September will be a trivial event for markets - the guidance in the one page press release will be closely examined for any signs of a shift from the tone of August’s guidance.

Looking further ahead, the market’s expected terminal rate of 1.60% implies a 60% 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 market-based spread is used.”