* RBNZ seen holding rates at 0.25%
* RBNZ seen steady on QE programme
* Markets focus on change to forward guidance
WELLINGTON, Sept 21 (Reuters) - New Zealand's central bank
is likely to keep interest rates steady at record lows and hold
off on further stimulus this week, even as the economy faces a
deep recession, on signs the fallout from coronavirus pandemic
could be milder than expected.
The Reserve Bank of New Zealand (RBNZ) will keep the
official cash rate (OCR) unchanged at 0.25% on Wednesday for a
fourth consecutive meeting, according to all 11 economists
polled by Reuters. The economists said they expected rates to
remain steady for the rest of the year.
New Zealand fell into its deepest economic recession on
record in the second quarter, data showed last week, but the
12.2% quarter-on-quarter contraction was smaller than the 12.8%
decline forecast in a Reuters poll.
Meanwhile, Treasury forecasts showed a milder short-term
shock from the coronavirus outbreak, while house prices have
defied forecasts and stayed buoyant.
"The recent period of stronger data means the RBNZ won't see
any need to loosen monetary policy further at this stage," said
Westpac Chief Economist Dominick Stephens.
About 97% of the market expects no change in rates this
week, but have priced in a move close to zero by April next
year, according to Eikon.
In the Reuters poll, three of the 11 economists expected a
rate cut in the first quarter of next year and seven expected
rates to enter negative territory in Q2 2021.
The RBNZ has held rates steady since cutting them by 75
basis points at an emergency meeting in March.
But in August the central bank expanded its bond-buying
programme to NZ$100 billion ($67.7 billion) and struck a dovish
It reiterated its commitment to holding rates until March
next year, and said it would consider negative rates and
low-cost funding to banks if further stimulus was needed.
On Wednesday, the markets will focus on whether there's any
change to this forward guidance, ANZ Bank said in a note.
"For the short end, any weakening of the commitment to keep
the OCR unchanged until March would certainly cause a flurry of
excitement, but this is not our expectation," said ANZ Chief
Economist Sharon Zollner.
($1 = 1.4767 New Zealand dollars)
(Editing by Ana Nicolaci da Costa)