RBNZ Financial Stability Report: Expect no changes to policy settings – Westpac

Michael Gordon, Analyst at Westpac, notes that “the Reserve Bank will be releasing its six-monthly Financial Stability Report (FSR) at 9am next Wednesday. We do not expect it to include any changes to policy settings.”

Key Quotes:

“First, we note that the RBNZ will be announcing its final decisions on bank capital requirements on 5 December. It will probably steer clear of commenting on the outcomes ahead of that announcement.

Instead, the main point of interest in the FSR will be around any changes to the loan-to-value ratio (LVRs) restrictions on mortgage lending. These have been loosened twice so far, in November 2017 and 2018.

Market opinion is split as to whether the RBNZ will loosen them further this time. Our view that there will be no change.

There has been speculation that last week’s on-hold OCR decision signalled an intention to loosen the LVR rules instead. That’s not generally the way it works at the RBNZ – each tool is assessed separately. And in any case, such a combo would shift the mix of credit conditions in the opposite direction to what we think the RBNZ would want.”