RBNZ: Cash rate on hold – TD Securities

Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities, notes that the RBNZ kept the cash rate on hold at 1% and the Bank mirrored recent RBA commentary, offering to ease monetary policy further, "...if necessary".

“Today's statement suggests the RBNZ is content to assess the outlook following the 50bps cut last month but with the Bank highlighting no significant change in the monetary policy outlook, it implies further easing is more likely than not. Unlike the June statement where the Monetary Policy Committee (MPC) noted "...a lower OCR may be needed over time", today's statement noted "...interest rates can be expected to be low for longer". No mention of 'lower' is consistent with the conditional easing bias. Overall the MPC sees risks skewed to the downside on a number of fronts - global trade/geopolitical tensions, low business confidence, likely delay in fiscal policy and likely low inflation. We had anticipated the Bank to point to downside risks to its 2020 GDP forecasts, but the RBNZ was positive on the outlook 1 year out, so this did come as a surprise. Although the RBNZ offered a contingent easing bias and a balanced outlook 1 year out, we retain our 25bps cut to 0.75% in November".