Most economists and traders expected the RBNZ would cut the OCR a quarter-point to 0.75 per cent after inflation expectations were weaker in a survey of business managers and professionals. However, the RBNZ's monetary policy committee wasn't swayed that the key rate needed to be cut, although governor Adrian Orr indicated the bank was ready to act if more stimulus was needed. And the forecast track for the OCR indicated a small chance of reduction in each of the next six quarters.
"The market was a little bit shocked by the Reserve Bank this afternoon," said Mark Johnson, a private client manager at OMF. "They've indicated an easing bias but the market pricing suggests the market remains to be convinced."
Two-year swap rates jumped to 1.1920 per cent from 1.0292 per cent yesterday, and 10-year swaps climbed to 1.6025 per cent from 1.5050 per cent.
Johnson said interest rate pricing indicated traders expected 12.5 basis points of easing through to the end of next year, compared to 17.5 basis points in Australia and 21 points in the US.
"There's no doubt that we would probably move in step with the RBA if it was to cut again," he said.
The kiwi climbed to 93.44 Australian cents from 92.50 cents, and Johnson said employment data across the Tasman tomorrow will be keenly watched because of its volatility.
A dump of Chinese data tomorrow will also be in view, with industrial production, urban investment and retail sales all key indicators for the health of the world's most populous nation. The local currency rose to 4.4865 Chinese yuan from 4.4355 yuan.
Local data today showed annual food prices rose at a faster pace in October than a month earlier, despite cheaper vegetables as they came into season. Separate figures showed the annual pace of rental prices rose at a slower pace in September than in August.
The kiwi rose to 58.03 euro cents from 57.40 cents, was at 49.75 British pence from 49.25 pence, and 69.66 yen from 69.12 yen.
