RBNZ Preview: Forecasts from eight major banks, decelerating hikes as recession is looming over New Zealand

The Reserve Bank of New Zealand (RBNZ) will announce its monetary policy decision on Wednesday, April 5 at 02:00 GMT and as we get closer to the release time, here are the expectations as forecast by the economists and researchers of eight major banks.

RBNZ is expected to hike the key Official Cash Rate (OCR) by 25 basis points (bps) from 4.75% to 5.00%. Eyes will be on the language in the statement amid no updated forecasts and Governor Orr’s presser.

ANZ

“We expect the RBNZ will raise the OCR 25 bps to 5.00%. If that’s not to be, we see a 50 bps hike as likelier than a pause. On balance, local data since the February MPS has not convincingly tilted things in either direction. But global financial sector wobbles suggest a degree of caution is appropriate, which the RBNZ can now afford given they are fairly confident the OCR is now in contractionary territory. We continue to forecast the OCR to peak at 5.25% with one more hike to come in May.”

Standard Chartered

“We believe the RBNZ is approaching the end of its hiking cycle. We maintain our forecast for a last 25 bps rate hike in April, taking the terminal policy rate to 5%, well short of the current RBNZ projection of 5.5%. We expect slowing inflation and a weak growth backdrop to allow the RBNZ to turn more dovish.” 

TDS

“The February Monetary Policy Statement made clear the Bank thinks further hikes are needed and we expect the RBNZ to hike its OCR by 25 bps to 5.00%. The Bank is likely to acknowledge the recent turmoil in US and European financials, but conclude NZ banks are in good shape. A tightening in offshore lending standards and Fed Funds terminal rate forecasts shifting lower imply downside risk to our 5.50% RBNZ terminal rate forecast. Unless the RBNZ suggests that terminal may be lower, NZD should be contained on the crosses but NZD is more likely to be a function of broad USD/Fed pricing dynamics.”

Rabobank

“The RBNZ will deliver their latest OCR decision, where a hike of 25 bps is expected to take the OCR to 5.00%. We expect the same outcome. The 0.6% contraction in Q4 GDP might prompt some pause for thought, and the RBNZ does have a reputation for shooting from the hip. Still, the prospect of structurally higher energy prices should be enough to tip the RBNZ over the line.”

NAB

“We think the RBNZ/MPC will largely hold to its February MPS line, by delivering a 25 bps hike in the OCR and maintaining a hawkish tilt in its commentary and minutes.”

Citi

“The MPC is expected to step down its pace of rate hikes and we expect this would be last hike in the current cycle, implying a terminal policy rate of 5.00%. A 5% terminal rate would be lower than the Bank’s guidance of the OCR at 5.5%. However, we believe that the data in NZ has deteriorated a lot earlier than the RBNZ’s bullish forecast and should justify not only stepping down its pace of rate hikes from 50 bps to 25 bps but also should signal the end of the tightening cycle because the impact of previous rate hikes is still filtering through the economy. If correct, and this is the last hike the RBNZ delivers in the tightening cycle, then the Statement from the MPC will likely need to be open the possibility for less hawkish forward guidance. Similar to the BoC, the RBNZ could signal that further tightening could be necessary to help alleviate inflation concerns. Either way, the RBNZ is likely to push against any nascent expectations of interest rate cuts this year.”

Wells Fargo

“We expect the central bank to continue tightening monetary policy. With inflation still elevated, we expect the RBNZ to deliver a 25 bps rate hike at its April meeting to 5.00%, and then deliver one last 25 bps hike in May to a peak of 5.25%.”

ING

“We expect the RBNZ to hike by 25 bps to 5.0% and to maintain a hawkish tone, which can support NZD. The slower pace of tightening is warranted by external and domestic downside risks to the economy and a lower inflation outlook. These same factors make us doubt that the 5.50% peak rate (projected by the RBNZ) will be reached.”