NZ: Tumbling Kiwi keeps RBNZ on track – Westpac

Dominick Stephens, Chief Economist at Westpac, expects the RBNZ to keep the OCR on hold and give the same neutral policy guidance that it has given all year.

Key Quotes

“We expect the OCR forecast to be the same as the August MPS – flat until 2019 and slowly rising beyond that.”

“The economic outlook has deteriorated, and the housing market is weaker than the RBNZ anticipated.”

“But the exchange rate has fallen sharply, meaning the overall outlook for medium term inflation is broadly unchanged.”

“The change of Government makes the economic outlook more uncertain. The RBNZ is better off waiting and seeing how Government policy evolves, rather than making bold changes at this point.”

“There would be very little financial market reaction to a neutral MPS along these lines.”