Westpac expects pause to rate cuts

The RBNZ appears sceptical about the extent of ‘green shoots' in the global economy, and they are ready to cut rates further if conditions deteriorate again. But the recent improvement in housing activity, net migration, business confidence and global market sentiment seems to reduce the immediate need for another rate cut.

We now expect a pause at the 11 June Monetary Policy Statement, with any further cuts delayed until September and beyond, once the extent of the slowdown in our major trading partners (particularly Australia) becomes clearer.

The message will still be that the OCR is likely to be at or below current levels for an extended period -

while the RBNZ has urged banks to lower their lending rates, we think the more pressing concern for them is to encourage borrowers to take up the low short-term rates that are already on offer, rather than locking in for longer terms at substantially higher rates.