Market news

21 May 2020

RBNZ: Call for a negative OCR in April 2021 – Westpac

FXStreet reports that economists at Westpac Institutional Bank now expect the RBNZ will reduce the OCR to -0.5% in April 2021 (previously November 2020). The kiwi tends to rise when global risk sentiment improves and risk sentiment will indeed improve as the Covid crisis fades over a number of years.

“The Reserve Bank revealed that it has asked the trading banks to ready themselves to implement a negative OCR by December 1 this year. We now expect that the RBNZ will cut the OCR to -0.5% in April 2021.”

“We expect that the RBNZ will expand its Large Scale Asset Purchase (LSAP) programme to $70bn at the June OCR Review, and $80bn at the August MPS.” 

“We forecast that the weekly pace of LSAP bond purchases will average $1.1bn until April 2021, slowing to $0.8bn after a negative OCR is introduced. We calculate that the LSAP will eventually total $100bn by June 2022.” 

“We are not forecasting foreign bond purchases, but if there is another big negative economic shock this year then the RBNZ could use that option.”

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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