Goldman Sachs with calls for rate cuts from both RBNZ (in summary)
RBNZ shifted to an explicit easing bias last week
- The shift surprised us
- The change in policy stance also surprised financial markets
- We view last week as a material dovish pivot in the RBNZ's reaction function
- now appears to be placing considerably more weight on downside risks to global growth and the NZD
- has become less tolerant of the growth slowdown in mid-2018 and ongoing soft business surveys
Looking ahead
- Governor Orr s new guidance is ultimately too strong to ignore
- we now expect one 25bp OCR cut at the May 2019 meeting (previously one hike in November)
- followed by an extended pause
- We acknowledge it is a very close call
- There is a material risk that the rate cut is delayed to either the June/August meeting
- However it's also possible that weaker near-term sentiment sees the RBNZ cut rates (potentially twice) in mid-2019
(bolding mine)
