Wednesday, 14th April, 2021

The Reserve Bank of New Zealand’s (RBNZ) April Official Cash Rate (OCR) review on Wednesday is likely to be the key focus of domestic markets this week.  The April OCR review is typically a one-page statement plus a summary of the Monetary Policy Committee’s meeting, and does not publish updated forecasts.  The key focus of the RBNZ communication will keeping a lid on longer-term interest rate expectations - 10-year interest rates have jumped sharply in NZ and abroad over 2021.  This lift has been supported by improved global financial market sentiment as the end of the COVID-19 pandemic seems in sight.  And while that may be the case for the US, which could reach herd immunity within the next three months, there is still a long way to go in NZ before we can open the borders and return to normal.  The RBNZ will be wanting to avoid a premature tightening in monetary conditions in NZ. The unexpected fall in December quarter GDP highlights the fragility of the NZ economic recovery over the year ahead.