First rate cut likely in August
Westpac New Zealand’s August Client Pulse Survey revealed a split between onshore and offshore clients regarding the OCR.
Domestic clients expect the OCR to end 2024 at around 5%, while global investors foresee a more dovish outcome, with potential cuts by year-end.
First rate cut anticipated by August
The survey indicated a strong consensus for an initial 25-basis-point rate cut from the Reserve Bank (RBNZ) in August.
“RBNZ is expected to ease soon,” according to the survey, though some domestic clients lean toward an October or November start for the easing cycle.
RBNZ expected to lead global rate cuts
RBNZ is predicted to ease ahead of the Federal Reserve, with most participants agreeing on a gradual reduction in the OCR. Offshore investors are notably more dovish, with some forecasting the OCR to drop below 3% by the end of 2025.
Growth and inflation drive easing expectations
Survey participants highlighted growth and non-tradable inflation as key factors influencing RBNZ’s easing decisions.
“Investors are heavily focused on growth and non-tradable inflation indicators,” the report said, with the unemployment rate also being closely watched for signs of a faster increase.
Caution urged amid easing predictions
Westpac chief economist Kelly Eckhold (pictured above) cautioned that market expectations might be overly optimistic.
“I think markets have gotten ahead of themselves... RBNZ will be watching the inflation outlook closely for a while yet,” Eckhold said, suggesting that the central bank may temper its approach rather than slash rates dramatically.
Read the Westpac media release.
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