RBNZ39;s outsized cut prompts bets for another 50 bp cut in Nov
RBNZ says inflation is within 13 target, sees subdued economy
New Zealand dollar slips, swaps fall on dovish policy stance

WELLINGTON, Oct 9 Reuters New Zealand39;s central bank slashed rates by 50 basis points on Wednesday and said policy is still restrictive even though inflation has returned to target, prompting markets to bet on yet more aggressive easing and sending the kiwi dollar skidding.

The decision to reduce the cash rate to 4.75 was in line with market pricing and most economists39; expectations, with 17 of 28 economists in a Reuters poll having forecast the Reserve Bank of New Zealand RBNZ to cut the benchmark rate by half a percentage point.

The Committee agreed that it is appropriate to cut the OCR official cash rate by 50 basis points to achieve and maintain low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate, the central bank said in its policy statement.

The kiwi dollar tumbled 0.9 to 0.6084, the lowest since August 19, while twoyear swap rates declined 7 basis points to 3.605 after the decision. Swaps imply there is further 45 basis points of easing to come at the RBNZ39;s November meeting.

Overall, the October meeting reinforces the bank39;s dovish stance and indicates no clear signs of slowing in November. With inflation within target and the labour market fragile, the RBNZ will ease rates more…