Massive week for Aussie and Kiwi markets

Massive week for Aussie and Kiwi markets

The RBA’s upcoming decision is highly uncertain, with markets pricing in a rate cut but some experts suggesting it’s a 50/50 call, which could impact election timing. The RBNZ is widely expected to cut rates this week, with most economists predicting a 50bps reduction, though some foresee a more gradual approach.

The Reserve Bank of Australia’s first meeting of the year is days away with money markets pricing in an 86% chance of a 25bps cut and a 14% chance that rates remain unchanged.

However, Australia Financial Review’s John Kehoe suggests market expectations of a 90% probability for a cut may be overstated, arguing the decision is closer to a 50/50 call.

If the RBA cuts rates on Tuesday, it could support the government’s message that cost-of-living pressures are easing and could lead to an early election announcement. If rates remain unchanged, the prime minister may delay the election until mid-April or May, hoping for a cut at the RBA’s next meeting on April 1.

Meanwhile, the RBNZ is expected to cut rates this week, with markets pricing a 68% chance of a 50bps cut and a 32% chance of a 25bps reduction. A Reuters poll of 33 economists found 32 expecting a 50bps cut. However, ASB chief economist Nick Tuffley anticipates smaller 25bps cuts in April and May instead.