RBNZ: Expect no change in message – ANZ

Analysts at ANZ suggest that this week the key domestic event for NZ will be the RBNZ OCR decision and although they expect no change in message from the RBNZ, they have updated their view on the outlook for the OCR.

Key Quotes

“We now expect the OCR will lift in November 2019, rather than August, consistent with a softer outlook for GDP growth and a more gradual increase in inflation. The RBNZ will wait for inflation to rise in a consistent way, and this will take some time in this environment. There are risks on both sides of the ledger. But on balance, we think cost pressures – especially wage costs – will push inflation higher and that the OCR will eventually rise. That said, with forecast hikes sitting very late in the economic cycle, there are decent odds they may not happen at all.”

“One of the key risks to up the ante of late is possible fall-out from trade war escalations. The implications for New Zealand are not yet clear. In the short term, New Zealand could benefit. But as a small open economy, we have benefited from the freeing up of global trade in recent years. We could be impacted significantly if this process were to go systematically into reverse or should the Chinese economy slow.”