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VIEW CHANGE: TD Securities expects RBNZ on hold until May 2025

RBNZ
  • TD Securities notes that the "Monetary Policy Statement (MPS) read less hawkish than its Nov'23 MPS."
  • "We were one of the two forecasters in the market that were anticipating a hike. Our call for the RBNZ to hike was a late change we made last Friday, with the shift being prompted by the RBNZ's Household inflation expectations report released on Thursday."
  • "The RBNZ's forecast that non tradables inflation will remain around 3.5%, above the projected headline inflation this year, and implies that a rate cut is likely to be out of the question in 2024. That said, the fact that the RBNZ expects tradables inflation to fall sharply means that it would require one or two big upside prints for the Bank to consider hiking. In effect the RBNZ has set a high bar to be brought back to the table to hike."
  • "We now expect the RBNZ to remain on hold till May next year when it starts cutting." TD Securities looks for the RBNZ overnight rate to be cut 75bp in total in 2025 to end the year at 4.75%.
  • "We look to receive NZ 2yr swaps around 5.25%. On curve, we prefer steepeners but no strong views on front end x-mkt rates. In a relative sense FX offers better risk-reward, disposed to selling NZD on crosses."
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