Research Note - RBNZ: where to next?

Research Note - RBNZ: where to next?

RBNZ signalled rates low until end-2010

We maintain our forecast for a 2.25% terminal OCR

Expect GDP growth downgrades in June MPS

RBNZ Governor Alan Bollard on April 30 cut the official cash rate (OCR) 50bp to a record low 2.5%, citing deteriorating global conditions. The statement was unexpectedly explicit in suggesting that the official rate will be kept low until the end of 2010. This seems a deliberate tactical move to send a clear message to financial markets. The Governor also said that any unconventional monetary expansion plans, like those implemented by other central banks, would not be adopted in the foreseeable future. The April policy statement said that the OCR will remain low for an extended period and left the door open for further policy easing. In fact, Governor Bollard stated that the OCR would be kept “at or below the current level through until the latter part of 2010,” adding that modest shifts in the OCR may be delivered in coming quarters. The announcement echoed those statements recently made by the Bank of Canada and Sweden’s Riksbank.

ENDS

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