ANZ economists are now picking that the Reserve Bank will start cutting the Official Cash Rate in August.
ANZ chief economist Sharon Zollner said she now expects the RBNZ to deliver a steady sequence of 25 basis point cuts starting in August, taking the OCR to 3.5% (from 5.5% currently) over 12 months.
She says based on ANZ's current forecasts, by the September quarter inflation will be back in the 1% to3% target band and unemployment will have "cracked the 5% mark and is still rising".
"August is not a strong conviction call by any means, and we currently see the risks as roughly balanced on whether the RBNZ starts cutting earlier or later than that. We would also note there’s still a chance of a hike, either in February if we get ugly CPI details or later in the year if inflation ultimately gets ‘stuck’."
Zollner said over the next six months, a strong supply recovery, previous weak GDP outturns and a deteriorating labour market should result in rapid disinflation for domestically driven Consumers Price Index (CPI) components.
"But with forward-looking activity indicators picking up, the RBNZ will remain wary of the risk of a second wind for the economy before persistent inflation is rooted out," she says.
"We don’t expect a lot of advance warning of policy easing. The sensible strategy for the RBNZ is to deny-deny-deny-cut, in a bid to avoid a premature easing in financial conditions that would be hard to haul a dovish market back from.
"Based on our macro view, markets are underestimating how long the “deny” part of that strategy will last."
31 Comments
Economic forecasting is an Impossible job these days.. world has gone nuts with very high potential for massive unknown events here are overseas (tht they arent taking account of). The most likely 'black swans?' for 2024 are...
- trump gets elected - creates economic chaos in Europe/Asia by pulling out of ukraine war and putting massive hikes on more chinese goods sparking a trade war (both are more likely than not)
- war in middle east drives oil prices sky high... (50-50)
- National-Act-NZF cant agree and deliver anything... (who knows what they even plan to do if they can agree)
- AI starts to massively impact existing jobs in the west, and the same time we experience a recession
Those are aside from increased risk of more terrorism, AI acceleration in other areas than employment, climate change disasters, USA debt not being addressed, potential for a pandemic, BRIC led wars (driven by the wests inability to support ukraine) etc..
The biggest issues of the last few years (excepting NZ's foolish overstoking of the property market) were all unforeseen (trump = president, pandemic, ukraine, israel...)
Its not a case of age, its a case of quality. The egg white should not go splat all over the pan when you try and fry it. The white should be pretty firm especially if you keep the eggs in the fridge. Pretty much stick to just 2 brands and if I cannot get one of them I don't buy eggs. They may now all be "Free Range" but they are certainly not all the same.
Inflation back by the September quarter down to the 1% to 3% range?
If this does happen, I will be very happily surprised, but I am very skeptical. Maybe these ANZ economists have access to information not everybody has access to.
Anyway, current swaps are pointing to a decrease in interest rates in 2024, so ANZ might not be completely wrong, after all.
On the other hand, ANZ's unemployment projections are a bit of a worry.
Worth reading this bit of nonsense again ...
"August is not a strong conviction call by any means, and we currently see the risks as roughly balanced on whether the RBNZ starts cutting earlier or later than that. We would also note there’s still a chance of a hike, either in February if we get ugly CPI details or later in the year if inflation ultimately gets ‘stuck’."
What does it really mean? Let me give you my interpretation:
1. It could come earlier, or later. If it comes earlier, we've established plausible deniability by pretending we don't really know what will happen.
2. As they pretend they have no clue - they throw in a scare that rates might actually increase. I.e. "Please ignore what is likely to happen and just fix long so our profits are assured."
ComCom has much work to do!
Not fair!
That "totally meaningless and muddled garbage" is carefully constructed to ensure banks profits.
Independent and honest assessment it was never meant to be. Ever. Nor should one approach any utterance from bank economists as being anything except slanted heavily towards those bank profits.
Oh dear. PMI still contracting (see today's release) ... As it has since Oct 21.
https://www.marketscreener.com/news/latest/New-Zealand-manufacturing-se…
The big banks would need to have a very strange mix of business customers not to have noticed this. Try and reconcile that thought with what they're saying about where the OCR will go .... friggin' charlatans!
more here: https://businessnz.org.nz/pmi/tough-year/
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