Re-fixing holdouts may have had the right strategy as RBNZ turns dovish

The Reserve Bank cut its official cash rate (OCR) from 3.25% to 3% on Wednesday and signaled two further cuts by the March quarter of next year to 2.5%, indicating at least one more cut than markets had expected.

In terms of RBNZ’s forecasts, in May, it had predicted that the lowest point of the OCR in the current cycle would be 2.9% but on Wednesday it signaled that 2.5% would be the lowest point, a significantly more dovish view.

Possibly an even more dovish clue to RBNZ’s change of heart was that its monetary policy committee had to vote on whether and by how much to cut its official cash rate (OCR) with four supporting the 25-basis point cut to 3% that was delivered, but two thinking a 50bp cut was warranted.

RBNZ had held the OCR steady in July after cutting from 3.5% to 3.25% in May.