RBNZ: Negative interest rates by April 2021 – ANZ

Economists at ANZ BAnk now expect the Reserve Bank of New Zealand (RBNZ) to cut the OCR 50bp at the April OCR Review. Furthermore, they see a further increase in the large-scale asset purchase (LSAP) programme in November as likely, perhaps to $120 billion. This policy is set to be a a real headwind for the kiwi.

Key quotes

“We are now forecasting the RBNZ to cut the OCR by 50bp to -0.25% in April 2021. Beyond that, further easing is possible, but there are constraints on the OCR going below -0.75%.”

“The RBNZ has ruled out changing the OCR before March 2021, but expressed a preference for a package of a lower OCR and a bank ‘funding for lending’ programme, should they conclude that further stimulus is required at that point. We think they will.”

“The LSAP programme could easily be extended to $120 billion in November, with the timeframe extended to December 2022. At this stage, this seems like the most likely outcome. That figure could rise to almost $140 billion if the RBNZ were prepared to buy 70% of outstandings, or if more fiscal support is needed and the government bond market grows more quickly.”