RBNZ: Market pricing 80% chance of OCR cut in November - Westpac

Imre Speizer, Research Analyst at Westpac, suggests that market pricing for a 25bp OCR cut to 1.75% by 10 November continues to imply an 80% chance, unchanged over the past two weeks.

Key Quotes

“September remains only a 12% chance given the RBNZ has communicated that it prefers to move on MPS dates. Our view is that a Nov cut is highly likely, and there is a chance of another cut to 1.50% early in 2017 if the data warrants it.

At this juncture, though, the economy appears to be in good shape, and really only needing the November rate cut in order to boost tradeables inflation. Dairy has started to recover, and the construction sector, which has been a key driver of New Zealand’s GDP and employment growth in recent years, is set to remain so for some time.

While the centre of gravity for the construction sector is shifting – Canterbury’s rebuild has begun its gradual wind down, while Auckland is picking up and building activity is also increasing in other regions - we expect year-on-year growth in the sector until at least mid-2018.”