Reserve Bank of New Zealand: Gradual hiking path into 2027 – TD Securities

TD Securities’ Prashant Newnaha and Howard Du expect the Reserve Bank of New Zealand (RBNZ) to raise the Official Cash Rate by 25 bps to 2.75% in September, in line with market pricing. They see the OCR track broadly unchanged from May, reaching 3% by year-end and around 3.30% terminal, with further 25 bps hikes projected in December 2026 and February 2027.

RBNZ seen hiking but staying gradual

"TD expects the RBNZ to hike the Official Cash Rate (OCR) 25bps to 2.75% with the six Monetary Policy Committee (MPC) voters coming to this decision by consensus."

"With the Sep OCR meeting date more than 90% priced for a hike and data supporting a hike, we doubt the Board will spend much time debating the case to pause. Pausing would add confusion to the Bank's prior messaging."

"We see little reason for the RBNZ's OCR projection to deviate far from the May MPS forecast for now. The track should show the OCR reaching 3% by the end of this year and terminal around 3.30%."

"In due course we see the risk of the RBNZ nudging its inflation forecasts higher, bringing forward and/or lifting its current forecast of terminal at 3.30% - just not at this meeting. Following next week's hike, we expect follow-up 25bps tightening at the Bank's Dec'26 and Feb'27 meetings, taking the OCR to 3.25%."

"Given the growth outlook is tracking in line with the Bank's May forecasts, it's unlikely the output gap projection has changed from the May forecast. With no material changes to the negative output gap path anticipated, there is no compelling case to take the OCR significantly above its current 3.30% projection."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)