RBNZ: RBNZ Still Sees 2.5% OCR Trough Depending On Data
Sep-11 00:02
Governor Hawkesby noted at the Financial Services Council conference today that the economy has looked better in July and there are signs that growth will pick up in H2, as was expected. He also stuck with the August projection that the OCR will trough at 2.5% but said that “could occur faster or slower depending on how the economic recovery evolves”, ie remains data dependent. The RBNZ expects Q2 GDP to fall 0.3% q/q (released September 18) but then recover to +0.3% in Q3 and +0.8% in Q4. 25bp rates cuts in October and November are expected.
- Acting Governor Hawkesby’s term is due to end early next month, although it can be extended for another 3 months and he has also applied for the position. He stated today that despite the turnover in leadership, the well-established MPC has the “continuity to push ahead with an ongoing emphasis on delivering our mandate”. Former Governor Orr’s official replacement is yet to be announced.
- The RBNZ continues to monitor the second-round effects from higher US tariffs and that the bank was surprised by the impact of their announcement on NZ consumer and businesses in Q2 and resultant stalling in growth.
- He also observed that higher inflation but lower house prices had weighed on consumer confidence.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
JGBS: Trading To Resume After Long Weekend
Aug-11 23:24
In post-Tokyo trade, JGB futures closed lower on Friday, -10 compared to settlement levels.
- With the US calendar light on Monday ahead of a heavy slate of data, the markets treaded water. Headlining is the key CPI release on Tuesday where the numbers will help provide some guidance for the Fed's policy path.
- MNI - The CPI report for July is released on Tuesday Aug 12, at 0830ET. Consensus sees core CPI inflation at a seasonally adjusted 0.3% M/M in June and unrounded analyst estimates broadly echo this with a median 0.32% M/M. It would mark a further acceleration from 0.23% M/M in June and 0.13% M/M in May for its fastest pace since January, with the latest firming seen coming from core goods inflation doubling to 0.4% M/M.
- Bloomberg -- "The new chief of Japan's financial regulator has a message for regional banks: don't rely on rising interest rates to fix your problems. Local lenders have been counting on last year's scrapping of negative rates to help turn them around, blaming the policy for crushing profitability. But the new era of higher rates will spark fresh competition for depositors at a time when technology is transforming the industry, according to Financial Services Agency Commissioner Yutaka Ito."
- Today, the local calendar will see Money Stock.
AUSSIE BONDS: RBA Day, 25bp Cut Expected
Aug-11 23:20
ACGBs (YM -1.0 & XM -1.5) are slightly weaker after a muted close from US tsys on Monday.
- MNI - The RBA's Monetary Policy Board is unlikely to surprise economists and the market again in August when its decision is announced today. Bloomberg consensus is unanimous forecasting a 25bp rate cut to 3.60% given the further moderation in underlying inflation in Q2 towards the band mid-point
- This month is likely to be more suitable than last month, possibly resulting in a 9-0 vote after July's 6-3 split in favour of holding.
- The tone of the decision and Governor Bullock's press conference is likely to reiterate the bank's gradual and cautious approach to easing. We expect any further cuts to coincide with forecasting meetings.
- ACGBs are 1bp cheaper with the AU-US 10-year yield differential at -3bps.
- The bills strip is -2 to -3 across contracts.
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in August is given a 97% probability, with a cumulative 60bps of easing priced by year-end (based on an effective cash rate of 3.84%).
- This week, the AOFM plans to sell A$1200mn of the 4.25% 21 December 2035 bond on Wednesday and A$1000mn of the 2.75% 2 1 November 2029 bond on Friday.
ASIA: Coming Up in Asia Today (amended)
Aug-11 23:12
| 0100GMT | 0800HKT | 1000AEDT | Singapore GDP SA QoQ 2QF |
| 0100GMT | 0800HKT | 1000AEDT | Singapore GDP YoY 2QF |
| 1130GMT | 0900HKT | 2030AEDT | India CPI YoY JULY |
source: Bloomberg Finance LP / MNI
