RBNZ to continue hiking by 50 bps at its August meeting – TDS

The Global Strategy Team at TD Securities (TDS) provided a quick analysis of Wednesday's mixed employment details from New Zealand, which reaffirmed bets for a further policy tightening by the RBNZ.

Key Quotes:

“As we expected, Q2'22 labour market softened slightly with the unemployment rate edging higher to 3.3% (cons: 3.1%, Q1'22: 3.2%) after hitting a record low last quarter. Employment growth disappointed expectations and was flat at 0% q/q (cons: 0.4%, TD: 0.5%. Q1: 0.1%) while participation rate also inched lower to 70.8% (Q1: 70.9%).”

“Despite the labour market report disappointing expectations, it still highlights a tight labour market with little spare capacity as the underutilisation stayed unchanged at 9.2%. Wages rose 1.3% q/q (cons: 1.1%, RBNZ: 1.2%), bringing annual wage growth to 3.4%, the fastest since 2008.“

“This is likely to add to non-tradeables inflation (domestic prices) in the quarters ahead. We expect the RBNZ to continue hiking by 50 bps at its August meeting given record high inflation and a tight labour market.”