RBNZ: OCR unchanged – Westpac

Dominick Stephens, chief economist at Westpac, notes that the RBNZ left the OCR unchanged at 1.0% at today's OCR Review and the press release suggested that the RBNZ does not currently see a need to cut the OCR further.

Key Quotes

“The overall assessment was that the outlook for monetary policy "has not changed significantly" since the August MPS. The RBNZ seems to be saying that its actions to date are sufficient. It noted that the OCR cuts to date have led to lower lending rates and a lower exchange rate; and it expected low interest rates to generate a pickup in domestic demand over the coming year.”

“The RBNZ did say that there was room to cut further "if required." We interpret this as an easing bias rather than a signal. In other words, the RBNZ views a cut as more likely than a hike, but is not committing to either at this point.”

“Actually the RBNZ's words were that there is scope for more "fiscal and monetary stimulus" (our emphasis), which amounts to a suggestion that the Government should engage in fiscal stimulus. That's an unusual move for the RBNZ.”

“Overall, the tone of the RBNZ's Review was in line with what we expected but a little less dovish than markets were expecting. Consequently, interest rates and the exchange rate rose slightly.”