Barclays: We do not expect the RBNZ to cut rates on Thursday. The fact that the March policy statement said that “policy easing may be required,” rather than strengthening its easing bias, suggests to us that another easing in June is more likely than in April. The Q1 headline CPI print was in line with the RBNZ’s forecast of 0.2% q/q, and the average of the RBNZ’s underlying inflation measures edged up to 1.1% y/y, marginally above the banks’ inflation target band of 1-3%. That said, inflation expectations, core inflation indicators and business confidence have softened of late, and the NZD TWI has appreciated 2.6% since the unexpected rate cut on 10 March.
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As such, we think the risk of an earlier cut remains, although it is not our base case. Overall, we think the dovish bias in the statement will remain, hinting at easing in coming months. The market is current pricing in a 48% probability of a 25bp cut in the April meeting, suggesting that the event risk for NZD is finely balanced.
Credit Agricole: When it comes to the RBNZ and in line with market expectations we see little scope of them easing monetary policy further. However, the central bank is likely to keep all options regarding a more aggressive policy stance intact, especially as a further appreciating currency may be regarded as a dampening factor to inflation expectations.
However, should commodity price developments and global growth expectations continue to stabilize, it appears unlikely that such a stance will have any meaningful currency impact.
