WELLINGTON (Reuters) - Economists are nearly split on which way New Zealand's central bank will go when it meets to review interest rates next week, a Reuters poll showed, after its governor signalled an easing bias at the last meeting.
The central bank's newly-formed monetary policy committee will make its first decision at the cash rate review on May 8, in a transfer of power to change rates from the governor alone.
Of the 15 economists polled by Reuters, eight expect the Reserve Bank of New Zealand (RBNZ) to cut the official cash rate (OCR) by 25 basis points to 1.50 percent, which would be the first since November 2016, while the remainder are predicting no change.
RBNZ stunned markets in its last policy review in March when Governor Adrian Orr said the next move in rates was more likely to be a cut, despite the central bank's projections in February showing the cash rate increasing in 2021.
"The governor did not promise to cut the OCR at the
first available opportunity," Sharon Zollner, chief economist at ANZ, said in a note. "He just called it like he saw it. He'll continue to do so."
The cash rate decision this time will be made by the MPC - a panel of bank staff and external members - that replaces the old framework of the governor being the sole decision maker, after the Labour-led government initiated a review of the central bank in 2017.
Decisions are reached by consensus, with a vote taken if needed, and minutes of the meetings will be published.
Chances of a cut have increased in recent months, as the RBNZ grapples with the prospect of weak economic momentum. Softer global economic conditions contributed to the central bank's shift to a dovish policy tone, Orr told Reuters in an interview last month.
But with things muddling along well enough, global risks diminishing and inflation close to the central bank's target, RBNZ would be tempted to hold rates in the next meeting, ANZ said.
Futures markets are pricing in a 33 percent chance of the Reserve Bank of Australia (RBA) cutting rates on May 7, a day before the RBNZ's decision. A Reuters survey showed 17 of 42 economists predicting a 25 basis point easing to 1.25 percent. [AU/INT]
An RBA cut would raise the odds of the RBNZ following suit, ANZ said.
Markets are divided and are pricing a 50 percent chance of an RBNZ rate cut.
"Next week's OCR decision is on a knife edge – we, and financial markets in general, remain uncertain about
whether the RBNZ will reduce the OCR or not," said Dominick Stephens, Chief Economist at Westpac Bank.
"We marginally favour a cut...," he said, adding that the odds of an OCR cut are about 55 percent, versus a 45 percent chance of no change.
(Editing by Jacqueline Wong)
