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Ahead of this week’s RBNZ, analysts at TD Securities explained that upbeat recent activity via exports, retail card sales, housing and strong GDP are mitigated by trade risks, low CPI and dismal business sentiment.  

Key Quotes:

“Unanimous consensus expects the OCR to remain at 1.75% and the Governor to muse that the OCR could move “up or down“ as per the Aug MPS. Dropping “we expect to keep the OCR at this level … into 2020“ is an unlikely hawkish twist.”

“Tier 1 indicator for the RBNZ and the day before the OCR Review. Confidence (prior -50) and own activity (prior +4) are 2008 recession levels. While Q2 GDP was strong, negative investment and employment intentions suggest  a H2  slump, and so a recovery would be hawkish for the NZD. Inflation expectations on target at 2.2%, but the RBNZ is looking elsewhere just now.”