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

The Reserve Bank started 2025 off with some good news for homeowners and slashed the OCR by 50 basis points.

The Central Bank also implied more rate cuts will come - and at a quicker pace than previously indicated.

 Milford Asset Management's Remy Morgan revealed how the markets responded.

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Episode Transcript

Speaker 1 (00:00):
Remy Morgan Milf from Milford is here.

Speaker 2 (00:01):
Hey Remy, Hi Ryan, how's it going.

Speaker 1 (00:04):
You have a really good thank you thanks for being
on the show with us. How did the market three?
Obviously a lot to do yesterday We've had company results,
but we're the main thing, of course, was the RBNZ.
How did the market react?

Speaker 2 (00:15):
Yeah, so today's Reserve Bank meeting that was the first
since November last year, given we've had the summer holiday
and the fifty basis point cut today was largely expected
and almost fully priced in. So what was actually more
interest was the rbn zaid forward track. So this was
revised down little, implying that the rate cuts will come

(00:36):
in slightly quicker than what was previously expected by the
rbn Z. So their track is now forecasting two twenty
five basis point cuts by July this year and a
cache erate of around three point one percent by the
end of the year, which is down from three point
five to five percent previously. Now that's actually a lot
more closely aligned to what the market had already been

(00:57):
pricing in going into the meeting. Because of that, the
market reaction was pretty subdued and there was really no
major or unexpected moves to call out. The next meeting
is on the ninth of April, and another twenty five
bases point cut is essentially fully priced by the market,
but what actually happens will depend on the data and

(01:18):
what unfolds between now and then.

Speaker 1 (01:22):
Remy, if we think about what's happening in the US,
obviously there's a lot of uncertainty to what extent that
influenced the Reserve Bank's decision today.

Speaker 2 (01:31):
Yeah, that's a good question. So the US Federal Reserve
is currently on pores with its interest rate easing cycle,
and this was something that the RBNZ did discuss, as
the market is now pricing in less cuts in the
US than back at the time of their meeting in November,
and this has implications for the currency. We've already seen
the New Zealand dollar quite a bit weaker against the

(01:53):
US since November. There's also quite a lot of uncertainty
around the US tariffs, and the RBNZ also discuss these risks. Now,
the impact of trade restrictions really remains quite uncertain, but
it might be something that needs to be factored into
future monetary policy responses. Now, these things can take a
bit of time to play out, and we'll see the

(02:14):
z RB and z respond accordingly.

Speaker 1 (02:17):
We also had the Reserve Bank of Australia use today.
How does this contrast with what's happening here in New Zealand.

Speaker 2 (02:24):
Yes, so yesterday the RBA finally cut its policy rate,
but only by twenty five basis points to four point
one percent. Now, this was its first cut to this cycle. Now,
as we know in New Zealand, we've already been cutting
since August last year and from a much higher peak
cash rate of five point five percent. And the tone
of the RBA implied that there could be a slower

(02:47):
pace of rate cuts from here than what the market
was pricing, which obviously compares to a slightly faster pace
now expected by the rbn Z in New Zealand. Another
key difference is that in Australia, the lays the market
remains much tighter, and the RBA actually revised down its
peak unemployment forecast to four point two percent, which compares

(03:09):
to the expectation of five point two percent peak unemployment
in New Zealand. So I think based on the current data,
it's fair to say that we could see some continued
divergence between the easing cycle in New Zealand and Australia,
but again this remains data dependent.

Speaker 1 (03:25):
Certainly sounds like it, Remy, Thank you very much for that.
That's Remy Morgan from Milford Asset Management. For more from
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