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Don’t worry, there’s still more “in the tin”

The 50 basis point cut by the RBNZ took markets by surprise this week and we now expect the Bank to cut rates to 0.75% by early next year. If the economic outlook deteriorates by considerably more than we currently expect the RBNZ may have to turn to unconventional monetary policy. In New Zealand we suspect negative interest rates would be favoured over quantitative easing.
Ben Udy Australia and New Zealand Economist
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More from Australia & New Zealand

Australia & New Zealand Data Response

Australia Retail Sales (May 2022)

The strong rise in retail sales in May highlights the strength in the Australian economy and is consistent with our view that the RBA will continue to hike rates aggressively in the months ahead.

29 June 2022

RBA Watch

RBA to keep hiking by 50bp for now

The Reserve Bank of Australia will probably lift the cash rate by another 50bp in July and August before reverting to smaller 25bp hikes. However, the risks are tilted towards a prolonged period of aggressive tightening and rates may well peak above our current forecast of 3%.

28 June 2022

Australia & New Zealand Economics Weekly

More 50bp hikes coming

We agree with RBA governor Phillip Lowe that market pricing for the Cash rate looks too aggressive. But we also think the consensus is still too dovish. After all, Governor Lowe is starting to grow concerned that wage growth will be too strong to allow the Bank to meet its target. And the RBA is still lagging behind a number of its peers in its hiking cycle. We therefore expect the RBA to hike rates to a peak of 3.1%, higher than the analyst consensus of a peak of 2.60%.

24 June 2022

More from Ben Udy

Australia & New Zealand Economics Update

Hawkish RBNZ will hike even earlier

The RBNZ’s hawkish rate outlook has prompted us to bring forward our forecast for the first RBNZ rate hike from November to May next year. But in contrast to the RBNZ, we don’t think the pandemic will cause lasting damage to the labour market so we’ve pencilled in fewer rate hikes than the Bank.

14 June 2021

Australia & New Zealand Economics Weekly

Lockdowns and bond yields ease

The end of the lockdown in Victoria is an upside risk to our forecast that consumption will be unchanged in Australia in Q2. Meanwhile, S&P upgraded Australia’s credit rating outlook but that has little implication for Australian bond yields. We expect yields to rise to 2% by the end of the year as the RBA starts to taper its weekly bond purchases in November.

11 June 2021

Australia & New Zealand Data Response

International Trade & Retail Sales (Apr.)

The trade surplus widened again in April but that was largely driven by higher commodity prices. Export volumes will need to recover further in the months ahead to prevent trade from being a drag on GDP growth yet again in Q2.

3 June 2021
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