What’s stopping RBNZ from meeting its inflation objective?

SINGAPORE (Aug 11): The Reserve Bank of New Zealand (RBNZ) has cut interest rates by 25bps, which takes the official cash rate (OCR) to an all-time low of 2%.

“We think the RBNZ will have no choice but to ease more than is currently priced in,” says UOB economist Lee Sue Ann in a Thursday report. The bank’s 90-day bank bill track, she observes, suggests there will be one more 25bps cut by early 2017.

Lee’s sentiment echoes that of RBNZ’s governor Graeme Wheeler, who indicated that the cut is likely to mark the beginning of a prolonged uphill battle to meet the bank’s inflation objective.

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