### POV - RBNZ CUT, TOO CLOSE TO CALL...>

NEW ZEALAND: ### POV - RBNZ CUT, TOO CLOSE TO CALL

- The RBNZ changed its forward guidance in March from a neutral bias to saying

the next move in rates is likely down.

- Q1 CPI & wage inflation missed RBNZ expectations which is a big concern. MNI's

PINCH model is now pricing in a 41% chance of a rate cut at Wednesday's meeting.

- Despite this it remains finely balanced, 14 of 20 analysts in a Bloomberg

survey look for a 25bps cut to the OCR, while 6 others point to a dovish pause.

- The RBNZ is expected to reaffirm global downside risks to growth, but note

there could be an upside risk to inflation from cost pressures. The May MPS will

also include detailed economic projections.

- NZDUSD 1-Week implied vols is showing 190 pips, the highest in G10.

- Dovish risk - The noted increase in easing bias could see GDP & CPI forecasts

heavily revised lower alongside the OCR rate path.

- Hawkish risk - No further downward revisions to the rate path. Maintain data

dependant stance, upgrade CPI forecasts and reaffirm that the Bank is not

particularly worried about the recent weaker GDP growth.