Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway stated on Friday that the bank’s forecasts suggest a further 75 basis point (bps) cut to the Official Cash Rate (OCR). Conway emphasized that the weaker New Zealand Dollar (NZD) would help boost export revenues, supporting the nation’s economic recovery.
Conway also highlighted that the output gap would help mitigate inflationary pressures, allowing the RBNZ to be more patient with rising inflation in the short term. He noted that while the RBNZ is willing to overlook an uptick in inflation this year, it currently does not foresee any rate hikes, and the possibility of lowering the OCR further below neutral remains part of the risk management conversation.
However, Conway clarified that taking the OCR below neutral is not part of the central bank‘s main projection for the time being.
Key Quotes:
“We expect another 75 basis points easing to support economic recovery.”
“A weaker NZD will help boost export revenues.”
“Currently sees no prospect of rate increases.”
Market Reaction: The New Zealand Dollar (NZD) traded 0.09% lower on the day, with NZD/USD hovering around 0.5760.
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