As credit conditions remain far from normal, fears of a sharp downturn in the $128B NZ economy has already raised bets that the Reserve Bank of New Zealand will once again lower borrowing costs at the December 3rd policy meeting. A Bloomberg News survey showed that 11 of the 14 economists polled expect the central bank to cut the benchmark interest rate by 100bp from 6.50% to 5.50%, while the remaining forecasts recognize a chance for a 150bp rate cut to bring the target rate down to 5.00%. Moreover, Credit Suisse figures are showing that market participants anticipate the RBNZ to cut at least 225bp over the next 12 months, which has risen from an initial estimate of 175bp from the previous week.

The downturn in the interest rate outlook suggests that investors remain bearish against the New Zealand Dollar, and may lead Governor Alan Bollard to lower borrowing costs well into the next year in order to stave-off further downturns in the economy.

The current uncertainty of the world As credit conditions remain far from normal, fears of a sharp downturn in the $128B NZ economy has already raised bets that the Reserve Bank of New Zealand will once again lower borrowing costs at the December 3rd policy meeting. A Bloomberg News survey showed that 11 of the 14 economists polled expect the central bank to cut the benchmark interest rate by 100bp from 6.50% to 5.50%, while the remaining forecasts recognize a chance for a 150bp rate cut to bring the target rate down to 5.00%. Moreover, Credit Suisse figures are showing that market participants anticipate the RBNZ to cut at least 225bp over the next 12 months, which has risen from an initial estimate of 175bp from the previous week.
The downturn in the interest rate outlook suggests that investors remain bearish against the New Zealand Dollar, and may lead Governor Alan Bollard to lower borrowing costs well into the next year in order to stave-off further downturns in the economy.