Preview of the Reserve Bank of New Zealand monetary policy meeting on June 11 (NZ time) this week

  • Announcement due at 2100GMT (on Wednesday 10 June)
  • Graeme Wheeler, governor of the RBNZ, will give a press conference following 5 minutes after the announcement (2105GMT)

There has been a shift in expectations for this meeting, with many now seeing a case for a cut to the Official Cash rate (OCR)

  • In fact, the most recent Bloomberg survey of economists have 6 of 14 surveyed expecting a 25 basis point cut (the other 8 see the bank on hold)
  • In the same survey, 9 expect the OCR to be lower by September

So, with 6/14 expecting a cut this week, that's pretty a pretty close call.

I'm in the 'no cut' camp, though.

  • At is April meeting the RBNZ made clear what the conditions are for a cut. In brief; demand weakening and inflation below target. Neither of these have been met - domestic demand is very solid indeed and inflation expectations are not as low as expected.
  • There is also the question of the continuing house price inflation - the RBNZ are of the view that the new measures to be introduced in October of this year will only have a very small impact (and even then, impacts can only be measured many months after the October introduction).
  • I'm not saying the 'cut' camp doesn't have a case - continuing falls in dairy prices & sliding business confidence argue in favour of RBNZ action.

Accompanying the decision we'll get the bank's Monetary Policy Statement (MPS). This is issued quarterly.

The Statement will be pored over for signals of what to expect from the bank in the future (the next policy meeting and announcement, for example, is due on July 23.

There will also be comments on the NZD exchange rate - most recently the bank has said the rate is "unjustified and unsustainable". Its fallen away since, but the currency market will be looking for more reassurance to take it lower still.

I'll have another look at what to expect and likely NZD behavior on the announcement as we approach Thursday.