HSBC Global Research Adjusts Forecast for RBNZ, Anticipates Aggressive Interest Rate Cuts
In a recent update, HSBC Global Research has revised its forecast for the Reserve Bank of New Zealand (RBNZ), predicting more significant interest rate cuts in the coming months due to signs of economic slowdown. The bank now expects the RBNZ to slash its cash rate by 50 basis points in both October and November, a departure from its earlier forecast of 25bp cuts.
The adjustment follows the Quarterly Survey of Business Opinion (QSBO), which revealed excess capacity in the economy and easing price pressures. This indicates that businesses are struggling to pass on increased costs to consumers, aligning with the RBNZ's shift to a more accommodative stance in August.
The economic landscape supporting the potential rate cuts includes a GDP contraction in the second quarter, a lukewarm job market, and subdued consumer and business confidence. Although there have been some improvements in short-term indicators, overall demand remains weak in the third quarter.
If HSBC's prediction holds true, the RBNZ's cash rate would drop from 5.25% to 4.75% in October. However, the firm acknowledges the uncertainty surrounding the central bank's decision-making process, given its swift transition from a hawkish to a dovish approach earlier this year.
In conclusion, these anticipated rate cuts by the RBNZ could have a significant impact on borrowing costs, investment decisions, and overall economic activity in New Zealand. Investors and businesses should closely monitor the central bank's actions and adjust their strategies accordingly to navigate the changing financial landscape effectively.