Citi bank commenting on the RBNZ now...........>

RBNZ: Citi bank commenting on the RBNZ now forecast 50bps of OCR cuts this year.

- Citi suspect that a move to bias policy expectations lower came from concerns

over the currency. The statement mentions easing in central bank expectations

globally "placing upward pressure on the New Zealand dollar". This is surprising

given that the TWI is still slightly below the 74.0 level forecast for Q1 in the

February MPS. Furthermore, the TWI hasn't appreciated meaningfully so far this

year. The outlook for 2019 and 2020 around 73.5 implies no loss in exchange rate

competitiveness.

- They now expect Governor Orr to follow through with the guidance for a rate

cut. The nearest opportunity will be the 8 May OCR and MPS. The Governor has now

shown that he is prepared to run the economy hot in the pursuit of maintaining

maximum sustainable employment and forcing CPI inflation back to the mid-point

of the target band. Our OCR call is now for -25bps on May 8 and a further -25bps

on August 7. Both these dates correspond with MPS releases and press

conferences.