RBNZ likely to leave the OCR on hold - Westpac

Dominick Stephens, chief economist at Westpac, suggests that they are expecting the RBNZ to leave the OCR on hold but to shift to a strictly neutral monetary policy outlook.

Key Quotes

“We expect the RBNZ will say something similar to “the next move could be up or down”. The RBNZ’s OCR forecast will be flat until at least 2021.”

“Separately, we have changed our OCR call. We are now forecasting no change in the OCR for 2019, 2020, and 2021 (previously we forecast hikes from Nov-2020).”

“The biggest motivation for changing our OCR call is the construction outlook – it now looks as though construction activity will peak in 2019 and dissipate from 2020. Second, there is increasing evidence that the economy lost momentum in late-2018.”

“Markets are pricing an 80% risk of an OCR cut in 2019, but we think the odds are below 50% because we expect the economy to regain some momentum in 2019.”