New Zealand Dollar is trying to extend this week’s recovery as the chance of RBNZ negative rates is fading. RBNZ chief economist Yuong Ha said in a webinar that he didn’t expect interest rate to be lowered further from the current level of 0.25% this year.

“We expect to hold it there for the next 12 months, until March next year,” he said. “We’re not planning on taking it lower at this stage, simply because the banking system is not ready for lower OCR rates at the moment. We’ve given the banking system until the end of the year to get ready so that the option is there for the Monetary Policy Committee in a year’s time.”

Though, he also noted that the MPC has “the ability to continue to monitor, revise, reassess and re-evaluate our decisions and the effectiveness of our decisions and do whatever it takes to get us back to our medium-term objectives.”

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Separately, Westpac also revised their forecast and expect RBNZ to cut OCR to -0.50% in April 2021, rather than November 2020. It said the timing of negative rate “would depend on how long it takes for trading banks to become operationally ready for a negative OCR”. As RBNZ has asked trading banks to ready themselves for negative OCR by December 1 this year, a negative OCT “will be operationally possible from the start of 2021.


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