According to Dominick Stephens, chief economist at Westpac, the Reserve Bank of New Zealand has surprised them by shifting to an easing bias for the OCR, while leaving the OCR unchanged at 1.75%.
Key Quotes
“The RBNZ is now saying that “the more likely direction of the next OCR move is down.” It also said that the balance of risks to the economic outlook “has shifted to the downside.” This is very different to February, when the RBNZ said the next move could be “up or down” and that there were “both upside and downside risks.”
“With only a few paragraphs to go on, it is difficult to discern exactly how serious the RBNZ is about cutting the OCR. The additional spanner in the works is that a committee will take over the decision making from 1 April, and the committee could chose a different stance. But clearly, the odds of an OCR reduction this year have increased.”
“We were very surprised by this change of stance, because the economic situation has not changed much since the RBNZ’s last missive in February. Perhaps the main reason for the change of stance was the actions of other central banks.”
“The RBNZ also cited global risks, reduced momentum in domestic spending, softness in the housing market, weak business investment and low business confidence – that surprises us, since none of these factors is much different to the forecasts laid out in the RBNZ’s last missive.”
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