The Reserve Bank of New Zealand announcement will come at 2100GMT on Wednesday 21 September 2016

BNZ are not expecting any rate cut this time around:

  • As we approach this Thursday's OCR review the market prices only a 5% chance of a cut from the RBNZ. This seems fair given the Bank's recent heavy hints that it prefers to take action at MPS's rather than OCR reviews
  • However, our core view remains for a 25bps cut at the November meeting, which is currently only 60% priced by the market
  • We do not expect the OCR review to deviate much from the core message of the more detailed August MPS. It is difficult to argue that enough has changed in the past six weeks to alter the MPS's core premise that; "further easing will be required to ensure that future inflation settles near the middle of the target range"
  • While recent activity data confirms NZ growth is on a healthy footing the Bank has made clear that headline inflation, and inflation expectations will ultimately determine its OCR settings. Arguably the near-term CPI outlook is looking weaker than MPS projections. This is not being helped by the resilient NZ TWI. We expect the 18 Oct CPI print to show Q3 inflation at just 0.0%q/q.