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ANZ economists don't believe the RBNZ will give warning of when it is going to cut the Official Cash Rate and that it will be a case of 'deny-deny-deny-cut' to avoid premature easing in financial conditions

Economy / news
ANZ economists don't believe the RBNZ will give warning of when it is going to cut the Official Cash Rate and that it will be a case of 'deny-deny-deny-cut' to avoid premature easing in financial conditions
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Source: 123rf.com

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."

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31 Comments

Stone the crows eh. Certainly deserve some big KPI based bonus for that stunning call! Pure value add!!

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7

They sure have a bob each way- might be some cuts, and might be a lift in February!

3 X 0.25 cuts this year., let's see...

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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...) 

 

 

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Trump will get elected.. Mark my words. 

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re ... "Economic forecasting is an Impossible job these days.."

Not so the OCR. It runs to a fairly well understood timeline.

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@DonKerrBab - i especially logged in to congratulate you on your comment,  in stitches.  Need more than thumbs up emojis on interest

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Knock me over with a feather. 

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4

Sounds about right to me.

There is the risk that the RBNZ doesn't care about recession (because they don't have to) and only makes cuts if we are heading towards deflation.

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3

Unemployment isn't an RBNZ target any more, just price stability.

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So what does the prophet say?  Sounds like the poor folk at ANZ need his or her up to date  prophecies. 

 

prophet please speak

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cheap eggs at the Warehouse, guaranteed

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2

Are they any good ? I pretty much stick to the same brand that tastes good and doesn't just go splat in the pan. Some eggs are horrible to the point I have chucked them out.

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2

I always put an egg in a cup of water and ensure it sinks to the bottom of the cup. If it floats chuck it...

 

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not a good idea to put eggs in water unless you use it immediately.

washed eggs go bad much quicker. 

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Vegan - Much cheaper option - More money saved for bigger house!

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are you sure veggies are affordable?

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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.

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15% this year guaranteed I assume. 

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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.   

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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!

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5

Yes, it’s totally meaningless and muddled garbage. Godawful.

We all know things are quite unpredictable and volatile right now, but this could be much better conveyed!

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2

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.

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0

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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Great that RBNZ is expecting to downshift a gear or two before crashing into the wall..

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Time to buy, 2024 will end with a 5-10% increase

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2

In mortgage defaults?

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8

Well I just did a grocery shop and noticed that a whole bunch of things just got a 10-20% price hike for the New Year.  Plus the massive hike in cost to see my dental hygienist.  They really think inflation is over?  They need to think again. 

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How much ? last time I went it was $100. Not been for 2 years now and way back used to go every 6 months which is overdoing it as they are pretty hard on the gums so once a year is plenty.

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In 2021 it cost $144. 

In 2022 it cost $149. 

In 2023 it cost $167.

And this week it cost $209.

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I haven’t noticed that, but my wife mentioned that to me yesterday. Didn’t give a % but she said she thought groceries were noticeably higher in price since the new year

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Yeah, its like they think because we've distracted ourselves with our food comas on holiday that we won't notice they've bumped all the prices up.  Well, we are noticing. 

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