Forex - New Zealand RBNZ Preview: RBNZ To Pause in September, Open to Another Ease in November [Repeat]

 23:20 (GMT) 24 Sep

  [Economic Data]   [Central Banks]

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New Zealand RBNZ Preview: RBNZ To Pause in September, Open to Another Ease in November [Repeat] (0101-NXKF-C01)

We are expecting the Reserve Bank of New Zealand (RBNZ) to leave its Official Cash Rate (OCR) unchanged at the September 25 meeting, following a surprise 50bps cut in August to 1.00%. The door for a cut on November 13 will likely be left open.

The RBNZ is likely to observe the performance of the domestic economy following a of 75bps cut to its OCR this year while also monitoring developments in the global environment.

So far in Q3, retail spending has picked up and the services sector has remain relatively robust but demand in the manufacturing sector has weakened. Indeed, new orders hit 10-year low in August. Business confidence has also yet to pick up from very pessimistic levels.

Q3 inflation and the labor market report due on October 16 and November 6 respectively will play a key role in determining the timing of the RBNZ's next move. The Bank will also continue to pay close attention to policy pass-through in order to lift sluggish consumer and business confidence.

Since there are very little expectations on a rate change in this meeting, the focus will thus fall on the rate statement for updates on the board's view for potential further easing later this year, more so with no updated monetary policy statement in this meeting.

While Q2 GDP growth was better than we expected, it is at the slowest since 2013 on y/y basis. With headwinds to GDP growth still significant from the global environment and business confidence, we expect the lack of pickup in GDP growth to trigger another rate cut from the RBNZ in November. For H1 2020, lower interest rates and scope for a stronger housing market could add tailwinds to GDP growth and should see the RBNZ on hold.

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