RBNZ to cut rates by half point to 4.75% on Oct 9
reuters://realtime/verb=Open/url=cpurl%3A%2F%2Fapps.cp.%2FApps%2Fcb-polls%3FRIC%3DNZINTR%253DECI poll data
reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=NZGDPAP GDP poll data
reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=NZINFAP CPI poll data
By Devayani Sathyan
BENGALURU, Oct 4 (Reuters) -New Zealand's central bank will cut its key interest rate by 50 basis points to 4.75% on Wednesday, according to a majority of economists in a Reuters poll who were split on where rates would be at year-end.
The Reserve Bank of New Zealand (RBNZ) in August cut rates, which had been at a 15-year high for over a year, leaving many analysts surprised but in line with market expectations.
Soon after the August meeting, central bank chief Adrian Orr raised the distinct prospect of two more rate cuts by Christmas as inflation was comfortably nearing its 1-3% target range. Weak economic growth and rising unemployment would support the central bank's decision to ease policy further.
Interest rate futures are pricing in a roughly 97% chance of a 50 basis points cut on Oct. 9 and over 90 basis points of cuts by the end of this year. 0#RBNZWATCH
Around 60% of respondents, 17 of 28, in a Sept. 30-Oct. 3 survey expected the RBNZ to cut its official cash rate NZINTR=ECI by 50 basis points to 4.75% next week. The remaining 11 predicted a 25 basis point cut.
A trim to 5.00% next week was the median forecast in the post-August meeting poll.
"We can see risks around cutting 50, but also risks around cutting 25, and we think they'll have a pretty vigorous discussion about what the right thing to do is. But at the end of the day, when you've got 50 points pretty much fully priced and universally expected, that is the path of least resistance," said Sharon Zollner, chief economist at ANZ.
"In so far as the OCR is still at 5.25% and the Reserve Bank's estimate of neutral is a lot lower than that then they probably think a 50-point cut can be justified in that regard. If the job is done, why not take your foot off the brake?"
All major local banks - ASB, ANZ, BNZ, Kiwibank, and Westpac - saw a 50 basis points cut next week and again in November.
However, economists surveyed were split on where rates would be after November's meeting. While 13 saw 4.25% eight predicted 4.75%. Five expected rates at 4.50% and two at 5.00%.
Median forecasts showed a total 100 basis points of cuts next year, taking rates to 3.50% by end-2025.
"We have had two years of recessions and that is starting to show up in the labour market. So the central bank now has work to do the other way...Inflation is not a problem, but the risk of undershooting and having a hard landing is becoming a greater risk," said Jarrod Kerr, chief economist at Kiwibank.
"Taking it from 5.50% to below 4% would provide that necessary relief for Kiwi businesses and households. I think they need to get moving and get moving quickly. It takes so long for monetary policy to see through."
Economists expected inflation to fall to 2.2% this quarter and average 3.1% this year and 2.1% in 2025.
New Zealand's economy contracted in the second quarter and was predicted to have done so by 0.1% last quarter, indicating a technical recession. But analysts expect it to grow 0.2% this year and 1.9% in 2025.
(Other stories from the October Reuters global economic poll)
Reporting by Devayani Sathyan; Polling by Anant Chandak and Susobhan Sarkar; Editing by Toby Chopra
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
