Despite the RBNZ’s best efforts to dissuade it, the market is
currently pricing in three rate cuts by the end of this year.
While we think this is entirely appropriate, we’re not
convinced the RBNZ would wish to condone this at this
juncture. Were it to do so then there is a very real risk that
the market would rally further into territory that would
very much unnerve the Bank. Don’t forget that market
pricing for year end is already around 100 basis points
below the Bank’s most recent track.
Putting all this together we feel even more comfortable with
our view that ultimately the RBNZ will be easing this year.
However, we are not convinced that today’s data will be
sufficient to shift the Bank’s stance just yet given its recent
past rhetoric. We now await RBNZ’s Chief Economist Paul
Conway’s January 30 speech with even greater interest in
the RBNZ’s update on recent data outcomes. - BNZ
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