MNI PREVIEW: RBNZ Set To Stand Pat; May See More Stimulus Soon

Repeats Story Initially Transmitted at 10:19 GMT Jun 25/06:19 EST Jun 25

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of New Zealand is set to leave rates

unchanged Wednesday, delaying any decision on further easing until its August

meeting, although the Bank has surprised in the past and more dovish tones from

other global central banks could trigger an early move.

     The RBNZ cut rates by 25 bps to a record low 1.5% in May, a move it called

pre-emptive and designed to stimulate the NZ economy before the current slowdown

could accelerate. Six weeks on, there has been little in the way of fresh data

to justify another cut, but there is an outside chance the Bank could add

further stimulus as annualised growth has slowed to 1.8%.

     Before the May decision, RBNZ modelling suggested the Official Cash Rate

might need to be cut by up to 40 basis points to achieve inflation and

employment targets over the next two to three years.

     With May's cut of 25 basis points, this suggests that the Bank has some

leeway for another cut, but has not yet offered any guidance around possible

timing.

     --OUTLOOK

     The RBNZ describes its current outlook as "evenly balanced," although

current growth rates suggest both inflation and employment will be under

pressure in 2019.

     As of this year, the Bank has a dual mandate to pursue an inflation target

of between 1% and 3% and also a labour market "operating near maximum

sustainable employment."

     Inflation is currently within the target range, at 1.5%, while unemployment

increased slightly in the final quarter of 2018 to reach 4.3%.

     This month's decision is a standard OCR review, and is not accompanied by

either an updated Statement on Monetary Policy or economic forecasts. These are

due in August, which markets anticipate as the most likely timing for the next

cut in rates.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com