RBNZ: Call for a negative OCR in April 2021 – Westpac

Economists at Westpac Institutional Bank now expect the RBNZ will reduce the OCR to -0.5% in April 2021 (previously November 2020). The kiwi tends to rise when global risk sentiment improves and risk sentiment will indeed improve as the Covid crisis fades over a number of years.

Key quotes

“The Reserve Bank revealed that it has asked the trading banks to ready themselves to implement a negative OCR by December 1 this year. We now expect that the RBNZ will cut the OCR to -0.5% in April 2021.”

“We expect that the RBNZ will expand its Large Scale Asset Purchase (LSAP) programme to $70bn at the June OCR Review, and $80bn at the August MPS.” 

“We forecast that the weekly pace of LSAP bond purchases will average $1.1bn until April 2021, slowing to $0.8bn after a negative OCR is introduced. We calculate that the LSAP will eventually total $100bn by June 2022.” 

“We are not forecasting foreign bond purchases, but if there is another big negative economic shock this year then the RBNZ could use that option.”


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