Sharon Zollner, chief economist at ANZ, notes that the RBNZ today held the OCR at 1.5% as universally expected and the Committee highlighted increasing downside global risks, while acknowledging that the local data had been mixed.
Key Quotes
“The RBNZ concluded that “a lower OCR may be needed over time”. We expect two further OCR cuts in August and November.”
“There was no urgency for the Reserve Bank to cut the OCR again immediately. The economy has indeed slowed considerably, but the most forward-looking indicators – and looser financial conditions – suggest a recovery in the second half of the year. The global slowdown is real, but the pass-through into the New Zealand economy has been muted so far – and there are reasons to think commodity prices may continue to be resilient. The labour market is still tight (though employment fell in Q1), and inflation is still trending up, albeit too slowly for the Reserve Bank’s liking.”
“All that said, the downside risks are clear.”
“The Summary Record of Meeting confirmed that it was a consensus decision to leave the OCR unchanged. Since the Committee has been instructed to seek consensus, this fact is not particularly newsworthy.”
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