- Thursday’s OCR review will come down to whether the RBNZ is more concerned about house prices or the currency.
- We very marginally expect the RBNZ to keep the OCR on hold until June.
- Regardless of whether the RBNZ cuts or not in April, we expect it to maintain a clear easing bias.
The RBNZ cut the OCR 25bp at the March Monetary Policy Statement (MPS) to 2.25%. Since then, there has been a growing risk that inflation will remain low for longer. March’s OCR cut was less stimulatory than the RBNZ would have hoped for, as banks did not pass on the full 25bp cut. Crucially, the NZD has been more resilient than even we have expected.
However, a reheating Auckland housing market is complicating the picture. Further OCR cuts risk stoking the housing market even more. Waiting until June gives the RBNZ time to address housing risks more formally in May’s Financial Stability Review. We are-just-leaning to a June cut, but April’s OCR review remains a line-ball call. Further appreciation in the exchange rate between now and the 28th could tip the RBNZ to an April cut.