Reserve Bank of New Zealand Preview: Six major banks expectations

The Reserve Bank of New Zealand (RBNZ) is scheduled to announce its monetary policy decision on 23 September at 02:00 GMT. The market consensus is for the RBNZ to stay on hold and keep the Official Cash Rate (OCR) unchanged at a record low of 0.25% for the fourth straight month in September. As we get closer to the release time, here are the expectations forecast by the economists and researchers of six major banks regarding the upcoming central bank's meeting. 

See – NZD/USD: The sharp reversal lower comes to a halt ahead of the 55-DMA at 0.6633 – Credit Suisse

ANZ

“ We expect a dovish tone at Wednesday’s Monetary Policy Review, reiterating that a lower OCR and bank “funding for lending” program are next up. The RBNZ is unlikely to change its forward guidance that the OCR will be left unchanged until March.  We also expect the RBNZ to continue its evolution towards a more tactical approach to its weekly LSAP purchases, given recent curve steepening.”

Westpac

“We expect no change in monetary policy next week. Data has been to the strong side, but the RBNZ will bank that without reaction. The RBNZ will reiterate that it intends to provide substantial monetary stimulus for as long as necessary and will remind us that it is preparing to deploy a negative OCR combined with cheap funding for banks, in case this is required in the future. We continue to expect that the bond-buying programme will run out of ammo before the battle is over. We, therefore, expect that the RBNZ will indeed have to deploy a negative OCR, in April next year.”

Standard Chartered

“We do not expect any changes to policy at this meeting after the central bank expanded the size and extended the duration of its Large Scale Asset Purchase (LSAP) programme in August. We expect the RBNZ to maintain its dovish tone though. Following the Jackson Hole event, Assistant Governor Hawkesby commented that the RBNZ’s ‘least regrets’ approach to policy could, like the Fed, see it allowing inflation to run above target for some time after a period of weakness. The central bank has expressed its preference for negative rates, supplemented by a term lending programme, as the next likely option after LSAP. We recognise the RBNZ’s firm accommodative stance and commitment to achieving its dual mandate of stable inflation and maximum sustainable employment, but are sceptical of the effectiveness of negative rates in achieving these objectives and therefore maintain our call for unchanged policy rates in 2021.”

ING

“Since the August policy meeting – when QE was expanded – RBNZ speakers have reiterated the bank’s readiness to add stimulus if necessary and a dramatic GDP contraction in 2Q (-12.4% YoY) left little doubts this meeting while be characterised by a similarly dovish tone. Still, we do not expect any cut or new policy measure at this meeting, with the Bank likely taking its time to fully assess the implications of a move to negative rates and wait for more data to gauge the impact of new lockdown measures in Auckland in August. With most of the RBNZ dovishness in the price, we suspect markets would be particularly reactive to the RBNZ announcement only if there is a surprising shift in language, with particular focus on any currency-related comments.”

TDS

“RBA Dep. Gov. Debelle delivers a speech on ‘The Australian Economy and Monetary Policy’. Focus likely to centre on lowering the cost of funding for semis via upsized TFF. Re RBNZ, unanimous expectation for the Bank to keep the cash rate on hold at 0.25% till Mar'21, with the Bank to reinforce willingness to deploy negative rates.”

Bannockburn

“The RBNZ is widely expected to leave policy on hold, and while a negative cash rate is possible at some juncture, it seems unlikely in Q4.”