Remy Morgan: Milford Asset Management expert on the market reactions to the RBNZ leaving the OCR on hold

The Reserve Bank left the OCR on hold at 3.25 percent - with the bank claiming it was waiting for more economic data.

Economists widely suspected the RBNZ wouldn't cut rates any further, and they believe there's more cuts to come.

Milford Asset Management's Remy Morgan unpacked the market reactions.

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Episode Transcript

Speaker 1 (00:09):
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Speaker 2 (00:16):
Let's go check in with the markets now Milfinasset Management.
Remy Morgan's with us Hi Remy Hi Rian. So, RBNZ
obviously holding today is expected. How's the market reacting?

Speaker 3 (00:28):
Yeah, for going into the announcement today, the market was
pricing very low odds of a rate card at this meeting,
and in the statement it was clear that the RBNZ
does still expect to lower the ocr further, which is
consistent with what they outlined in May. Now post the statement,
there was actually a bit of volatility in the market
with New Zealand dollar swap rates and the currency moving

(00:49):
a little higher initially, but these moves they quickly unwound
and then they settled sort of roughly where you'd expect,
given there were no real surprises.

Speaker 2 (00:59):
And what is the market expecting from here?

Speaker 3 (01:02):
Yeah, So the interest rate market, it's pricing roughly a
two out of three chance of a cut in August
and at least one four cut by Christmas, and that's
not too dissimilar to what it was thinking going into
the announcement today. And it's currently expecting around one and
a half to two further cuts from here in total,
and that will see the end of the interest rate

(01:23):
cutting cycle bottoming out it just under three percent. But
whether these market views will change or not will really
depend on where the domestic data lands and policy developments offshore.

Speaker 2 (01:36):
Remy Trump's all over the place on tariffs at the moment,
but has deadline self impostedline of ninth July technically expires
overnight tonight our time. How market's looking, Yeah.

Speaker 3 (01:46):
So you'll recall back in April, following the initial announcement,
we saw global indices like the S and P five
hundred dropped significantly, But over the last ninety days we've
seen a lot of recovery and new highs reached. Now
already this week we've seen Trump releasing some of his
tariff plans, but with a first of August implementation, and
we've seen global equities edge down on sentiment, but only

(02:10):
very slightly. And maybe one area to call out specifically
is US pharmaceutical stocks. So they did pair back on
some prior gains, and that was because there was some
news overnight that they could be facing up to two
hundred percent tariffs on their products manufactured outside of the US,
but it wasn't a major negative reaction, and that's likely
because those specific tariffs would have quite some time before

(02:33):
they would potentially be implemented. So I think that I
think things could still be a bit choppy, but global
equity markets have held up reasonably well so far amongst
all of the noise.

Speaker 2 (02:43):
I certainly have Remy appreciate that update. Thank you very much,
Remy Morgan, Milford Asset Management.

Speaker 1 (02:48):
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