RBNZ Preview: Forecasts from seven major banks, going big on the OCR

The Reserve Bank of New Zealand (RBNZ) will announce its monetary policy decision on Wednesday, November 23 at 01:00 GMT and as we get closer to the release time, here are the expectations as forecast by the economists and researchers of seven major banks.

RBNZ is expected to hike the Official Cash Rate (OCR) by 75 basis points (bps) to 4.25%, which would be the first super-sized rate hike after five consecutive 50 bps moves.

ANZ

“We expect the RBNZ will raise the OCR 75 bps to 4.25%. If there were to be a surprise, a 50 bps hike is more likely than +100 bps. We are forecasting the OCR to peak at 5%, via another 75 bps hike in February on a ‘let’s just get it done’ basis. If data cools more rapidly than expected the RBNZ could well slow the pace at that point. But regardless, we see upside risk to our forecast of a peak 5% OCR, given what’s looking like a well-entrenched wage-price spiral at this point.”

Westpac

“We expect the RBNZ to raise the OCR by 75 bps to 4.25%. Recent data has pointed to mounting inflation pressures, raising concerns that the Reserve Bank has fallen behind the pace despite its relatively early start to rate hikes. We expect the OCR to peak at 5% by early next year. And the RBNZ’s preferred ‘stitch in time’ approach means that it will be looking to head off the risk of an even higher peak.” 

ING

“We expect the RBNZ to hike by 50 bps and signal a peak rate around 5.0%. The ongoing downturn in the housing market and worsening external conditions argue against a larger, 75 bps move. We are not fully convinced the RBNZ will ultimately deliver all its projected hikes, but a dovish pivot is unlikely on the cards at this stage.”

SocGen

“We are likely to see a 75 bps hike in RBNZ rates, to 4.25%.” 

TDS

“The Bank appears to be drifting further from its remit as Q3 headline CPI surprised to the upside and private sector wages growth hit a record. RBNZ would have also been unpleasantly surprised by the rebound in ST inflation expectations. We will watch closely for RBNZ's new OCR track which may indicate a new terminal rate of 5%.”

NAB

“We have opted for 75 bps, which would take the OCR to 4.25%. But this is not with any strong conviction, and we could understand if the Bank suffices with a 50 bps move on the day. As for what November’s MPS will forecast as a peak on the OCR, we would guess something in the top half of the 4s.”

Citibank

“We expect the RBNZ MPC to steepen its pace of rate hikes in November and lift the OCR by 75 bps to 4.25%, cementing the RBNZ as one of the more hawkish central banks globally. This will take monetary policy well into restrictive territory (above the average neutral estimate of around 2%). The acceleration in rate hikes from 50 bps to 75 bps would come from a combination of a tight labor market, an acceleration in wages, and higher than expected inflation in Q3. We also expect large upward revisions to inflation forecasts in the November SMP. The team also pencils another 50 bps hike in February after which the RBNZ is likely to pause for the remainder of 2023, implying a terminal policy rate of 4.75%.”