Technical Analysis

What’s ahead for the Reserve Bank of New Zealand – terminal rate of 5.5%?

Eamonn Sheridan

Comments from BNZ on their outlook for Reserve Bank of New Zealand rate hikes ahead:

Senior RBNZ officials … Karen Silk and Christian Hawkesby speaking over the past two days

  • Both highlighted the importance of ensuring inflation expectations returned to levels consistent with the inflation target.
  • Asked whether there was a scenario where the RBNZ could stop short of taking the OCR to the 5.50% peak indicated by its projections, Assistant Governor Silk noted “if the information shows that we’ve reached that [inflation] peak and we see that turn and we’re starting to see real impacts on inflation and inflation expectations, then that does offer us the opportunity to revisit.”

BNZ’s view:

  • Our initial estimates are that CPI inflation over the next two quarters will come in well below the RBNZ’s forecasts. This opens up a potential pathway for a lower peak in the OCR, although our central forecast is aligned with the RBNZ’s projections at this point.

And, the data point to watch:

  • Given the emphasis the RBNZ is placing on inflation expectations, the RBNZ’s Survey of Expectations will become a major data point on the calendar for the market.

The Reserve Bank of New Zealand is not meeting again until February next year:

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