The RBNZ kept the OCR unchanged at 5.5%, as was universally expected. The focus of attention is whether the first cut will come in November, or whether the Bank will wait until February.
The final review this year will be on the 27th November. The next review is not until 19th February 2025. So, there is a long gap between decisions, and as a result there is a lot of focus on these dates.
ANZ economists still have a February cut pencilled-in but have highlighted that the risks are tilting towards the first cut coming in November rather than February as they are forecasting. They advised that the OCR Review tilts things a little further that way. They also advise that “the data will decide: next week’s CPI data was always going to be more important for the OCR outlook than whatever the RBNZ had to say today.” (ANZ Research, 10 July)
ASB economists wrote that there were plenty of early signs that the RBNZ is starting to eye up data for when it should cut the OCR. ASB economists “are confident the RBNZ will cut in 2024, in November by 25bp at the least if not earlier or bigger”. (Economic Note, 10 July)
BNZ’s latest commentary was prior to the OCR Review when their economists reported that “We still reckon February 2025 is the most likely starting point but think that by November of this year the necessary conditions will be met for the RBNZ to give a clear indication of its intent to move early in the New Year”. (RBNZ Preview, 1 July)
Westpac economists advised that the RBNZ took a more dovish view – easing looks to be coming earlier than RBNZ previously thought. They wrote that the short-term inflation outlook seems more comfortable for the RBNZ, but it’s the weaker growth momentum that seems to be top of the Reserve Bank’s mind. They believe that the RBNZ’s monetary policy strategy is shifting towards preparing for a reduction in restrictiveness. The RBNZ is “keeping it tight” but looks forward to easing earlier. Westpac economists see this as consistent with their forecast of an initial easing in February 2025 with some chance of a November easing. (Economic Bulletin 10th July)
Kiwibank economists wrote that their take is that the RBNZ subtly softened its language. The downside risks to growth and inflation were acknowledged and emphasised. Kiwibank economists continue to expect the cutting cycle to commence in November this year. (Commentary & insights, 10th July)
Today’s Official Cash Rate review from the Reserve Bank has tilted economists’ thoughts towards the first cut coming in November this year, rather than February next year. Although it could still go either way.