RBNZ to keep rising “at pace” and to signal a higher peak – Westpac

Next week, the Reserve Bank of New Zealand (RBNZ) will have its monetary policy meeting. Analysts at Westpac expect the central bank to hike by 50 basis points next week, and to repeat in NOvember and February meetings. 

Key Quotes: 

“With inflation risks escalating and domestic activity remaining resilient, another 50 basis point rise in the cash rate is in the bag for next Wednesday’s review.”

“Next week’s decision won’t include a new set of forecasts, so any change in the projected path for the OCR will have to be conveyed verbally. We expect the RBNZ to repeat its recent language that it will continue to tighten monetary policy “at pace”, and may say that the Committee anticipates a higher OCR path than what was projected in the August statement.”

“Markets have priced in some possibility of a 75 basis point increase, in keeping with the supersized moves by other central banks like the US Federal Reserve in recent months. We can’t completely rule that out: with the OCR currently at 3%, our updated forecast implies another 150 basis points to go, and with no time to be complacent about it.”

“We’ve revised up our forecast of how high the Official Cash Rate will need to go in the Reserve Bank’s battle against inflation. We now expect a peak of 4.5%, compared to our previous forecast of 4%.”