Westpac Bank places "relatively low odds on a cut" at the Reserve Bank of New Zealand's June 14 monetary policy review, in particular as the recent fall in interest rates on bonds and the New Zealand dollar have "gone a long way towards providing some protection against weaker global conditions," it says in a weekly commentary. It notes that "domestic conditions alone are certainly not making the case for a rate cut and it's "more that the global turmoil is condemning us to slow growth rather than a second recession." However, while Westpac Bank is expecting the Official Cash Rate to remain on hold at 2.50% for the rest of the year, it notes "there's a meaningful chance (say one in four) that the European crisis leads to a market breakdown on a par with the 2008-09 global financial crisis--in which case the RBNZ would respond similarly and cut interest rates hard, say by 100bps."
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