RBNZ Cuts Rates, Analysts Forecast Further Easing On The Way

The Reserve Bank of New Zealand (RBNZ) cut its Official Cash Rate (OCR) by 50 basis points as it was expected. As a result, the New Zealand dollar fell to a two-month low against the US dollar as investors and traders see that the RBNZ would be willing to relax further its monetary policy.

RBNZ Lowers Interest Rates

The RBNZ’s governing board decided to cut its benchmark interest rate by 50 basis points, in line with market expectations. This was the second time in a row that the central bank reduced its borrowing costs. In its post-meeting statement, the RBNZ said that it “assesses that annual consumer price inflation is within its 1 to 3 percent inflation target range and converging on the 2 percent midpoint.”

Moody’s Analytics economists told Reuters that “overall, the October meeting reinforces the bank's dovish stance and indicates no clear signs of slowing in November. With inflation within target and the labour market fragile, the RBNZ will ease rates more swiftly.” ANZ analysts seem to agree with this view mentioning that “there was nothing in today’s commentary to dissuade the market from continuing to price a follow-up 50bp cut in November as the likeliest outcome.”

US CPI Inflation In September 2024 Report

The US Department of Labour is expected to release data regarding consumer price inflation in September. Economists suggest that headline inflation will come in at 2.3% on an annualised basis, dropping from 2.5% recorded in August. Core inflation is expected to come in at 3.2% on a yearly basis, remaining unchanged. If the headline inflation figure agrees with the forecast, it would be the lowest number recorded since February 2021.

Economists still scrutinise Friday’s strong Nonfarm Payrolls report while also waiting for the Federal Open Market Committee minutes due to be released later today. ING economists wrote in their report that “the market has already scaled back around 30bp from the 2024 Fed easing cycle over the last few weeks but equally we doubt investors are in the mood to re-price an aggressive Fed easing cycle just yet.”

World Bank Comments On Chinese Economy

World Bank’s economists forecast that the China's GDP growth could drop to 4.3% in 2025 from 4.8% in 2024. The stimulus measures announced earlier in the month by Chinese authorities upgraded the 2024 forecast by 0.3% but the 2025 forecast remained unchanged.

The World Bank report mentioned that the stimulus plan would likely help the supply side but would not strengthen consumer demand. Its analysts suggested that weak consumer spending, unstable property market and an aging population could be potential challenges for the Chinese economy, adding that structural reforms should be implemented to achieve long-term growth.

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