RBNZ cuts the OCR to 1.50% - Westpac

RBNZ cuts the OCR to 1.50% - Westpac”

In a press conference at the Reserve Bank on Wednesday afternoon, Orr revealed that the decision of the committee to cut interest rates was unanimous, meaning no vote was required.

Reserve Bank governor Adrian Orr.

FOREX MARKET IMPLIED VOLATILITY AND TRADING RANGES Looking to other NZD currency crosses, forex traders might shift their focus to AUDNZD or NZDJPY seeing that their overnight implied volatility measures have also skyrocketed to their highest levels since October 2017 and November 2016 respectively.

Markets are split, as are economists with Westpac Bank saying the decision is "on a knife edge" and ASB Bank calling it "finely balanced".

Market pricing had pointed to a 50 percent chance of a 25 basis-point cut to 1.5 percent today. However, the outlook for employment growth is more subdued and capacity pressure is expected to ease slightly in 2019.

"We expect to see the impulse from lower interest rates to come through spending and investment activity, and part of that will be housing activity". The committee reached a consensus decision on Wednesday to cut the OCR.

The new structure emerged after phase one of a review of the Reserve Bank Act to modernise the policy frameworks, governance, and accountability arrangements announced by the Labour-led government shortly after taking office.

"The next move in the OCR will likely be data dependent; we have penciled in August but feel the risks are skewed to a later move, " said Nick Tuffley, the Central Bank Chief Economist.

Adding that "it doesn't look that the RBNZ will ease repeatedly to push interest rates lower and the central bank may potentially take a wait-and-see stance".

It doesn't anticipate the switch to a committee will have much impact.

The RBNZ has chose to lower its official cash rate by 25 basis points, taking it down to the same level as Australia's at 1.5 per cent.

"She notes that domestic data has confirmed the "economy is cooling but hardly freezing up".

The track implies a 50 percent chance of a further cut sometime next year, but then increases over the projection.

The official cash rate (OCR) was cut to a record low 1.5 percent after being on hold for more than two years.

Expectations for a cut had grown in recent months, as New Zealand struggles with weak economic momentum, slowing global growth and inflation falling further below its target.

On the global front, the RBNZ is expecting global economic growth to stabilise thanks to the large reduction in global interest rates that has occurred recently.

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