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Remy Morgan: Milford Asset Management expert on the market reactions to today's OCR cut · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk zed B.
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  Speaker 1: Follow this and our wide range of podcasts now on iHeartRadio.
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  Speaker 2: Remy Morgan Milf from Milford is here.
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  Speaker 3: Hey, Remy, Hi Ryan, how's it going.
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  Speaker 2: You have a really good Thank you, thanks for being
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  Speaker 2: on the show with us. How did the markets three?
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  Speaker 2: Obviously a lot to digesterday We've had company results, but
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  Speaker 2: we're the main thing, of course, was the RBNZ. How
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  Speaker 2: did the market react?
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  Speaker 3: Yeah, so today's Reserve Bank meeting that was the first
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  Speaker 3: since November last year. Given we've had the summer holiday
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  Speaker 3: and the fifty basis point cut today was largely expected
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  Speaker 3: and almost fully priced in. So what was actually more
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  Speaker 3: interest was the rbn zaid forward track. So this was
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  Speaker 3: revised down little, implying that the rate cuts will come
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  Speaker 3: in slightly quicker than what was previously expected by the
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  Speaker 3: rbn Z. So their track is now forecasting two twenty
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  Speaker 3: five basis point cuts by July this year and a
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  Speaker 3: cache erate of around three point one percent by the
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  Speaker 3: end of the year, which is down from three point
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  Speaker 3: five to five percent previously. Now that's actually a lot
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  Speaker 3: more closely aligned to what the market had already been
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  Speaker 3: pricing in going into the meeting. So because of that,
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  Speaker 3: the market reaction was pretty subdued and there was really
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  Speaker 3: no major or unexpected moves to call out. Now, the
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  Speaker 3: next meeting is on the ninth of April, and another
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  Speaker 3: twenty five bases point cut is essentially fully priced by
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  Speaker 3: the market, but what actually happens will depend on the
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  Speaker 3: data and what unfolds between now and then.
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  Speaker 2: Remy, if we think about what's happening in the US,
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  Speaker 2: obviously there's a lot of uncertainty there to what extent
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  Speaker 2: that influenced the Reserve Bank's decision today.
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  Speaker 3: Yeah, that's a good question. So the US Federal Reserve
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  Speaker 3: is currently on pores with its interest rate easing cycle,
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  Speaker 3: and this was something that the RBNS did discuss, as
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  Speaker 3: the market is now pricing in less cuts in the
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  Speaker 3: US than back at the time of their meeting in November,
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  Speaker 3: and this has implications for the currency. We've already seen
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  Speaker 3: the New Zealand do are quite a bit weaker against
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  Speaker 3: the US since November. There's also quite a lot of
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  Speaker 3: uncertainty around the US tariffs, and the rbn Z also
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  Speaker 3: discussed these risks. Now, the impact of trade restrictions raally
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  Speaker 3: remains quite uncertain, but it might be something that needs
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  Speaker 3: to be factored into future monetary policy responses. Now, these
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  Speaker 3: things can take a bit of time to play out,
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  Speaker 3: and we'll see the RBNZ respond accordingly.
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  Speaker 2: We also had the Reserve Bank of Australia use today.
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  Speaker 2: How does this contrast with what's happening here in New Zealand.
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  Speaker 3: Yes, so yesterday the RBA finally cut its policy rate,
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  Speaker 3: but only by twenty five basis points to four point
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  Speaker 3: one percent. Now, this was its first cut to this cycle. Now,
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  Speaker 3: as we know in New Zealand, we've already been cutting
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  Speaker 3: since August last year and from a much higher peak
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  Speaker 3: cash rate of five point five percent. And the tone
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  Speaker 3: of the RBA implied that there could be a slower
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  Speaker 3: pace of rate cuts from here than what the market
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  Speaker 3: was pricing, which obviously compares to a slightly faster pace
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  Speaker 3: now expected by the RBNZ in New Zealand. Another key
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  Speaker 3: difference is that in Australia the labor market remains much tighter,
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  Speaker 3: and the RBA actually revised down its peak unemployment forecast
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  Speaker 3: to four point two percent, which compares to the expectation
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  Speaker 3: of five point two percent peak unemployment in New Zealand.
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  Speaker 3: So I think based on the current data, it's fair
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  Speaker 3: to say that we could see some continued divergence between
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  Speaker 3: the easing cycle in New Zealand and Australia. But again
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  Speaker 3: this remains darted dependent.
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  Speaker 2: Certainly sounds like it, Remy, Thank you very much for that.
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  Speaker 2: That's Remy Morgan from Milford Asset Management.
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