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VIEW: ASB "now expect a further 50bp in........>

RBNZ
RBNZ: VIEW: ASB "now expect a further 50bp in total of OCR cuts, 25bp in Nov &
now 25bp in Feb, taking the OCR to a fresh record low of 0.5%. A November cut
looks all but assured, though there is likely to be debate amongst some people
over whether the RBNZ will cut by another 50bp then. After the decidedly mixed
response to the 50bp OCR cut, we expect the RBNZ will revert to smaller 25bp
steps. Rather than reassure that the cavalry is on the way, the 50bp seems to
have caused some disquiet. Hence, 'only' 25bp seems prudent - barring a run of
extremely poor news. Given monetary policy is likely to get uncomfortably close
to the point that unconventional measures need to be primed, it is also time for
the Government to seriously consider some quality stimulus measures. There is
plenty of debt headroom and extremely low financing costs to take advantage of.
Low business confidence predates the recent escalation of global risks, and the
export sector has been one of the stronger parts of the economy. A Government
charm offensive with businesses and the rural community wouldn't hurt, along
with policies aimed at incentivising investment and employment. Interest rate
cuts alone won't win hearts and minds, though they will help."
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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