VIEW: ASB note that "the cautious RBNZ.........>

RBNZ: VIEW: ASB note that "the cautious RBNZ assessment and our expectation that

CPI inflation will remain low have seen us push out the start of the next

expected RBNZ tightening cycle to Feb '20 (prev. Nov '19). The OCR has been at

record lows (1.75%) since late '16, but the RBNZ has recently become more

cautious in its interest rate outlook. The Aug '18 Monetary Policy Statement

pledged to keep the OCR at current levels into '20, with a neutral bias for

subsequent OCR moves. We remain constructive on the economic outlook and do not

expect RBNZ cuts. However, the risk is that if inflationary pressure fails to

materialise, eventual OCR increases may occur later than early '20. We have also

revised down our assumed end-point for the extent to RBNZ tightening, with the

OCR expected to peak at just 2.75% this cycle (from Aug '21 onwards). This is

based on our updated judgement that the 'neutral' OCR is now closer to 3% than

the circa 3.5% assumed by the RBNZ. We also expect that the RBNZ will tread more

carefully given the moderate policy tightening expected from other central banks

and downward global risk profile: the RBNZ is unlikely to continue to raise

rates when overseas central banks are on hold or contemplating rate cuts."