Analysts at Kiwibank in New Zealand on their Reserve Bank of New Zealand outlook. This in (very) brief from a longer note:
- The RBNZ lifted the cash rate to 2%, and signalled more rapid-fire 50bp hikes to come. The revised OCR track is steeper and the terminal rate was shunted higher to 3.95%. The RBNZ’s main concern is taming the inflation beast.
- Our chart of the week shows the significant upward revision to the RBNZ’s wage growth forecasts. The tight labour market is a key source of inflationary pressure.
- We now expect the RBNZ to deliver another two 50bp hikes in July and August (to 3%), followed by two 25bp hikes to 3.5% by November. We don’t buy into the need to go to 4%.
And, what to watch ahead:
- Inflation expectations are the key to the RBNZ’s resolve. We need to see expectations fall before the RBNZ would even consider stepping back
NZD/USD update: