VIEW: Kiwibank Pushes Back Call For Negative OCR, Looks For Shallower Move

Kiwibank note that "with the FLP now in train, and the outlook slightly more upbeat, the probability of future OCR cuts by the RBNZ have reduced. The outlook remains highly uncertain, however. The return to full employment remains many moons away, and it is far too early to call an end to the easing cycle. It is still more likely than not that the RBNZ will be forced to do more in the recovery phase. The balance of risks are still to the downside. We are still one covid outbreak away from another lockdown. And a cut in February can't be ruled out if the FLP doesn't induce the desired impact on retail lending rates. We maintain our view that the next move by the RBNZ will be a cut to the OCR. However, we have pushed out the likely timing of a rate cut. We have pencilled in a 50bp cut in the cash rate in May, previously we had a 75bp cut in February. A cut to -0.25% in May will still leave the RBNZ with ammunition (another 25-50bps) to cut further, if warranted."