Banks lower lending, deposit rates
Before a global IT outage caused the “blue screen of death” (BSOD) over the weekend, major banks in New Zealand lowered their carded mortgage, business, and term deposit rates, Kiwibank reported.
The move comes as wholesale interest rates markets factor in early RBNZ rate cuts, aided by the latest inflation data.
“Our call for a rate cut in November has gone from being a distant outlier, to consensus. And market traders have gone further, flirting with the idea of a cut as early as August,” Kiwibank’s Jarrod Kerr, Mary Jo Vergara, and Sabrina Delgado (pictured above, from left to right) said.
Impact of the IT outage
The BSOD caused widespread disruption across banking, flights, healthcare, and retailing.
“Many of us found our laptops as nothing more than paperweights over the weekend,” the Kiwibank economists said. “The blue screen of death (BSOD) caused all sorts of problems, worldwide.”
The recovery process has been slow, exposing a critical weakness in the system.
Market reactions and predictions
“The relentless rally in Kiwi rates kicked off by the pivot in the July MPR Statement continued apace last week,” said Matthew Crowder, Balance Sheet Manager – Treasury.
The wholesale market shows a significant chance of rate cuts in August and October, with further reductions expected in November.
Inflation data insights
Recent inflation reports indicated a downward trend, with June quarter inflation below the RBNZ’s forecast.
“Inflation at 3.3% was below our forecast 3.4%, and the 3.6% of the RBNZ,” the economists said.
The report reinforces the expectation of further moderation in price pressure, potentially leading to rate cuts by Christmas.
Currency market movements
“The Kiwi dollar continued to trade under the 0.61 level last week, in the aftermath of the RBNZ’s MPR, where they were more dovish than anticipated,” said Mieneke Perniskie, trader - Financial Markets.
The Kiwi dollar’s movements are influenced by expectations of rate cuts and broader economic conditions.
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