Reserve Bank stuns economists with OCR cut prediction
The central bank abandoned its neutral stance and adopted a downside view as it kept the OCR at 1.75% today. The RBNZ made clear the next change is more likely to be a cut than a hike, pointing to a "weaker global outlook" and "reduced momentum in domestic spending". It said dovish recent statements from global central banks had put upwards pressure on the Kiwi Dollar.
Economists were caught off guard by the announcement, just a month after the central bank said the next move could be "up or down" at February's MPS. Leading commentators said Adrian Orr is preparing the market for a cut.
Jeremy Couchman of Kiwibank said: "It is a tip towards a cut, and that was certainly a surprise. I would have expected an acknowledgement of what is going on offshore, but I think the [RBNZ] was trying to signal towards the downside scenario they pointed to in February, that if the global economy started to deteriorate, they would make some cuts. They are directing markets towards that."
Couchman said Kiwibank has re-assessed its OCR forecast, having previously predicted a hike in mid 2021. "We now expect a rate cut in the May MPS meeting, under the freshly formed committee. We now expect a 25bp rate cut in May, followed by another cut in August – largely depending on the performance of the currency," Couchman said in a statement.
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