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MNI RBNZ Preview – August 2024: Close Call, August Communication Opportunity

EXECUTIVE SUMMARY

  • We expect the RBNZ to discuss a rate cut at the August meeting but opt to keep monetary policy unchanged while communicating its intention to ease before year end through its statement, press conference and updated staff forecasts. It is a close call with 9 of 23 forecasters on Bloomberg expecting a cut.
  • Q2 labour market data was in line with RBNZ forecasts, wage inflation remained robust and while Q2 headline inflation was below expectations, domestically-driven non-tradeables was elevated and showed only moderate improvement. We believe that the MPC will want more time to be confident inflation is moderating as forecast, its condition for easing.
  • In May, the RBNZ revised up its 2024 and 2025 inflation projections but we believe that they are likely to be revised lower again this month driven by Q2 printing 0.3pp below the RBNZ’s forecast and its change in the July statement to “second half of this year” from “by the end of 2024”. The degree of these downward revisions to inflation and the subsequent impact on the OCR profile should drive easing expectations.

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