NZ: Costs of rate cut too great - BNZ

Research Team at BNZ, believes that the RBNZ did the right thing in delaying any further OCR easing.

Key Quotes

“For there to be more than the one further cut signalled by the RBNZ today it comes down to whether base factors cannot create enough inflation to offset the robust currency, or if financial stability concerns are overridden. We retain our view of a 25bps cut at the Bank’s next meeting, the 11 August Monetary Policy Statement. However, a lot depends on key data and events between now and then.

We believe next Thursday’s Q1 GDP growth will print under the 0.6% the RBNZ now expects. We are picking 0.3%, but dented by timing issues around agriculture production. On the flip side, we think there is upside risk to the RBNZ’s Q2 CPI forecast of 0.6% (0.6% y/y). We are looking for 0.8% (0.8% y/y). This is due 18 July.”