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Analysts at ANZ are expecting the RBNZ will likely acknowledge the softening of the GDP at the OCR Review this week but maintain an overall similar tone to the February MPS, after last week’s GDP data showed growth continuing to moderate, slipping from 2.6% to 2.3% y/y.

Key Quotes

“Near-term GDP indicators point to ongoing softness and the RBNZ’s forecast for growth above 3% y/y this year is looking hard to achieve. That said, there is scope to wait and see how developments unfold.”

“Moving forward, the RBNZ’s view on how potential output evolves – based on its assessment of capacity pressures – will be crucial for the inflation and policy outlook. Currently, the economy is coming up against constraints, but we expect that these will start to wane as headwinds build, making it difficult to sustain inflation at the 2% target over the medium term.”

“Once that eventually becomes apparent, we expect the RBNZ will lower the OCR. We continue to pick November for the first move, though there are risks that could see this happen earlier or later than we expect.”