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MNI RBNZ Preview - April 2024: Too Soon To Ease

EXECUTIVE SUMMARY:

  • The RBNZ is firmly on hold and there appears to be a high bar for it to shift rates in either direction for now. When it meets on April 10, we expect it to leave rates again at 5.5% where they have been since May last year.
  • The April meeting will not include a forecast update or a press conference. We expect the statement to be in line with February’s softer tone with a moderate tightening bias retained, as the RBNZ has “limited tolerance to increase the time to the target mid-point” and it has an asymmetric reaction function with the consequences of easing too soon outweighing those of a delay.
  • Governor Orr said in February that policy needs to remain “restrictive” to return inflation to target but the MPC is now more confident this will occur as expected. However, it is still too soon to discuss rate cuts, which it didn’t do at the last meeting, and the OCR path is steady through 2024. If the economy continues to develop as the central bank expects then rate cuts are unlikely until early 2025.

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