RBNZ Tracker

Delivering as expected

The RBNZ delivered a 50bp OCR cut to 3.75% as we and consensus expected.

The OCR track was lowered but the end point was maintained at a bit above 3%, implying 2-3 more 25bp cuts this year (this is not a forecast though).

The lower OCR track is consistent with a near-term upward revision to the unemployment rate profile and downward revisions to forecasts for the output gap (i.e. more near-term spare capacity) and non-tradables inflation.

Governor Orr also commented in the press conference that the passage of time has also increased the MPC’s confidence that the disinflationary process is on track.

In addition, in stark contrast to Australia the RBNZ expects government spending “to decline as a share of the economy over the medium term”, creating space for easier monetary policy settings.