The RBNZ will announce its cash rate decision and monetary policy statement on 10 May
- We don't expect a change in the OCR outlook
- But if there is a change, it will be in the direction of slightly earlier hikes than previously signaled
- Next week's MPS will reveal a great deal about Adrian Orr's style and how the OCR will be affected by the new PTA
- The wording of the MPS and the press release will be different, but markets shouldn't necessarily take that as a signal
- It might just reflect the new Governor's communication style
- The RBNZ's new labour market directives probably won't cause a change in the OCR outlook this time
- However, the labour market target might matter at other points in time
A preview of the upcoming RBNZ meeting next week by Westpac. With regards to the market reaction, they say that there is a risk of greater-than-expected volatility in the first hour or so after the announcement.
The RBNZ statement release will no longer be under embargo prior to the release, so if there is a change to the statement it will take the market a while to "divine the key messages".
Here's what they have to say for the kiwi's reaction to that:
- If the RBNZ keeps the OCR outlook broadly unchanged, we suspect there would be no material market reaction once the initial volatility has settled down
- If the OCR outlook is upgraded to slightly earlier hikes, markets would respond by sending swap rates a few basis points higher
- The NZD might also rise slightly, particularly if the RBNZ mentions directly the recent fall in the exchange rate
- However, the NZD is in such a powerful downdraught at present that any rise in the exchange rate would be short lived
