Economist at Lee Sue Ann suggests the RBNZ could now refrain from acting on the policy rate at the November event, resuming the hike cycle in February (and May).
Key Takeaways
“As expected, the Reserve Bank of New Zealand (RBNZ), at its October meeting, decided to increase the Official Cash Rate (OCR) to 0.50%. The RBNZ had previously shown a preference to initiate a rate move at meetings when it also releases a Monetary Policy Statement (MPS).”
“Going forward, we maintain a cautious view as far as the pace of rate hikes is concerned. Although we expect [Tuesday’s] decision to be the first in a series of rate hikes from the RBNZ over the next year; we think the RBNZ’s projections for rapid rate hikes through 2022 is overly optimistic.”
“There will be one more RBNZ meeting for this year – 24 November. For now, we are penciling a rate hold in November, on the basis that the RBNZ has “lifted off” from its record-low and would now prefer to keep its options open, with any further tightening likely to occur in a small and steady approach. We continue to expect follow-up 25bps hikes in February and May, taking the OCR to 1.00% by mid-2022.”
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