RBNZ to cut and 50bp not out of the question - Amplifying Global FX Capital
Greg Gibbs, Director at Amplifying Global FX Capital, notes that following today's RBNZ Economic Update, the Central Bank has clearly telegraphed that is ready to cut rates in August, adding that 50bp is not out of the question.
Key Quotes
The RBNZ “Economic Update” released on its website today significantly expanded its views on the NZD exchange rate, suggesting that it will cut rates at its next policy meeting on 11 August in an attempt to offset or weaken the currency.
These changes are likely to be viewed as a significant step-up in the measures employed by the RBNZ, expanding the LVR restrictions across the country to all borrower types, with tighter restrictions on investors.The market is currently pricing in an 85% chance of a 25bp cut on 11 August, and is discounting a further rate cut by March next year (Rates are currently a record low 2.25%).
We think the odds are close to 100% of a cut on 11 August, with a high chance of a follow up cut before year end, especially if the NZD remains resilient. A cut of 50bp on 11 August is now a possibility in our view.