Outlook for Borrowers: Post November MPS
The Reserve Bank of New Zealand (RBNZ) reduced the Official Cash Rate (OCR) by 25bp to 2.25% at the Monetary Policy Statement (MPS) on Wednesday. The rate cut was widely expected by analysts. Market pricing implied a small chance of a larger cut following the surprising 50bp move in October. The decision was reached by 5-1 majority. The dissenter preferred to leave rates on hold, which was the alternative option discussed by the Committee. This was Governor Hawkesby’s final meeting with Dr Anna Breman beginning her term on 1 December.
Outlook for borrowers: September update
NZ interest rates have declined to new lows for the cycle against a backdrop of weak domestic activity and expectations that inflation will return to target over the medium term. The dovish pivot by the Reserve Bank of New Zealand (RBNZ) at the August Monetary Policy Statement (MPS) was the initial catalyst for the move lower. Recently, weak GDP data for the June quarter raised concerns about the contours of the economic recovery and contributed to a further leg lower in rates across the yield curve.