VIEW: BNZ write "the RBNZ has firmly nailed....>

RBNZ: VIEW: BNZ write "the RBNZ has firmly nailed its colours to its mast. While

we thought the balance of economic data would rail against a rate cut today, the

RBNZ instead chose to focus on the economy's downside risks in pushing through

what is, effectively, a pre-emptive cut in rates. But not only did the Bank cut

the cash rate today to 1.5% it also intimated a clear desire to give it another

nudge lower....Against our better judgment, we will therefore include a 2nd rate

cut into our forecasts to acknowledge the RBNZ's dovish leanings. For now we

have thrown this into Nov but we are ambivalent between Aug & Nov & will be

watching the data closely. Moreover, we wouldn't want to rule out the

possibility that conditions eventually prevent a second cut. We haven't yet had

time to work through the implications of this on our full suite of forecasts so

our longer term interest rate track should be considered as work in progress.

Needless to say, we think the balance of risk is that the actual & exp. near

term cuts are relatively quickly reversed. To us it looks like the RBNZ has been

spooked by the combination of softer domestic indicators & recently heightened

concerns about global trade."