ASB says RBNZ interest rate hike next week is a real possibility – sees a November cut

ASB has pushed back its forecast from an Reserve Bank of New Zealand rate cut to the November meeting, from August.

As for next week (the RBNZ meeting on February 28):

  • It is the first RBNZ decision since May last year for which an OCR increase is a realistic possibility.
  • We
    continue to expect the RBNZ to remain on hold, but the main risk is still that OCR cuts get delayed slightly.
  • Governor Adrian Orr’s speech on Friday helped lay out the RBNZ’s thoughts on the
    inflation targeting framework and time horizons for getting inflation under control. The RBNZ is firmly of the view
    that keeping the 1-3% target with a focus on getting inflation to the 2% mid-point remains appropriate. The RBNZ is
    giving itself up to 3 years to have forecast inflation back to 2%, although that length of time will also depend on its
    tolerance for the impact of any transitory inflation shocks – tolerance which is likely to be lower at present given the
    persistent underlying inflation pressures. All up it was a measured speech, with little signs of urgency to lift rates but
    also reinforcing the ongoing focus on the persistent elements of inflation.

ANZ is tipping a hike next week:

This article was written by Eamonn Sheridan at Source