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New Zealand’s June quarter GDP jumped by +1.0%/qtr, outpacing TD/median expectations of +0.8%/q, while the annual growth picked up from 2.6% to 2.8%/y, notes the research team at TD Securities.

Key Quotes

“The OIS strip has adjusted from a 40% chance of a cut over the coming year to closer to 20%. Even when we pushed back our first hike to November 2019, we were more constructive on the economy, and attached only a small risk to the RBNZ delivering a rate cut.”

“The RBNZ decides on the Official Cash Rate (OCR) next week (27 Sep) mere hours after a widely expected US Federal Reserve hike. OCR Reviews used to be place-making 4-5 paragraphs noting that conditions are unfolding as expected, but under RBNZ Governor Adrian Orr this is not guaranteed.”

“Actual activity data since the August MPS has been upbeat, with decent card sales, exports and a revival in housing, however, persistently low inflation and recessionary-level business sentiment are deep concerns for the RBNZ.”

“TD expects the OCR to remain at 1.75% next week (as does unanimous consensus), the Governor to muse that the next move could be “up or down” as per the August policy assessment, as well as repeat that “we expect to keep the OCR at this level … into 2020″.”