RBNZ: about as confident as a market can get - Westpac

Analysts at Westpac suggested that market pricing for a 25bp OCR cut to 2.0% on 11 August implies a 99% chance, about as confident as a market can get.

Key Quotes:

"Markets have also priced in a 1.75% OCR by Nov 2016. Low inflation has already seen the RBNZ cut the OCR to a record low. Now, although inflation is likely past its nadir, it’s only set to climb at a gradual pace – probably too gradual for the RBNZ’s liking. The RBNZ essentially told financial markets in July that the OCR will be cut at the 11 August Monetary Policy Statement.

We agree with markets and expect that they’ll cut rates again in November. Our main argument is that with an already subdued inflation environment, and strength in the exchange rate adding to the downward pressure on prices (the TWI is a hefty 6% above the RBNZ’s forecast) , the RBNZ is facing an uncomfortably slow return to target and needs to take action via the OCR to get the ball rolling."