RBNZ Preview: Forecasts from eight major banks, single or double shot?

The Reserve Bank of New Zealand (RBNZ) will announce its monetary policy decision on Wednesday, February 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 right major banks. 

The RBNZ is widely expected to deliver 25 basis points (bps) to the Official Cash Rate (OCR), raising it to 1.0% from 0.75% previous. 

ANZ

“We expect the RBNZ will raise the Official Cash Rate (OCR) 25bp to 1.00%. The RBNZ has a big job to do, and we would not rule out a 50bp hike. But as in November, there are lower-risk ways the RBNZ could tighten conditions more aggressively if they feel it’s necessary.”

Westpac

“We expect the RBNZ to raise the Official Cash Rate by another 25 basis points to 1.00%. The RBNZ needs to take the heat out of domestic demand to rein in inflation pressures. But unlike many of its overseas peers, the RBNZ already has this process under way. Mortgage rates have already risen in anticipation of OCR hikes, and this is clearly having the desired effect on the housing market. To complete the job, the RBNZ will need to follow through on those rate hikes. Our forecast remains for the OCR to reach a peak of 3% by the second half of next year. That profile can be comfortably achieved in 25 basis point increments.”

Standard Chartered

“We expect the RBNZ to hike the policy rate to 1.0% from 0.75% previously. Inflation has continued to surge, inflation expectations are rising further, and the labour market continues to tighten. We expect a total of four hikes in 2022. Our relatively less hawkish call is predicated on our view that it will be challenging for the RBNZ to raise the OCR above the neutral rate in the medium-term on the premise that supply-side pressures and labour shortages should ease in the quarters ahead as borders reopen. The risk to our call is faster-than-expected normalisation. We will be watching the tone of the policy statement amid slightly softer sentiment indicators recently. We would also keep an eye on cash rate projections to see if the RBNZ projects an even more aggressive hiking cycle.”

TDS

“We expect the RBNZ to lift the OCR by 25bps to 1% even though the Nov'21 MPS OCR track implied a 50bps hike. Aside from the headline decision, the market's focus will be on 1) the projected OCR track - has the terminal rate been lifted significantly from 2.60% in the Nov'21 SoMP (mkt implied is around 2.6%) and 2) the Bank's thoughts on LSAP runoff.”

ING

“We expect another 25bp hike and signals that more back-to-back rate increases are on their way, which should give some help to the New Zealand dollar.”

MUFG

“In light of higher inflation, tighter labour market conditions, the buoyant housing market, and long gap since the last RBNZ policy meeting, we believe there is a high risk of a 0.50 point hike. It poses some upside risk for the NZD in the near-term.”

Citibank

“Our base case is for the RBNZ to deliver a 25bps rate hike this week, and for the MPC to increase the OCR by 100bps this year to 1.75% by year’s end. However, the risk is that the RBNZ could increase the pace of monetary tightening, rather than by 100bps of tightening in 2022, to 125bps or even 150bps this year.” 

Wells Fargo

“We, along with the consensus, expect the central bank to raise rates another 25 bps to 1.00%. We expect the RBNZ to continue its shift toward a less accommodative monetary policy stance. At the same time, we favor a more measured 25 bps rate hike as opposed to a larger 50 bps increase, particularly after the central bank governor said late last year the RBNZ would take a ‘cautious’ approach to tightening by moving in 25 bps increments ‘for now’.”

See:

• NZD/USD to struggle to surpass 0.6750, RBNZ impact secondary to external factors – ING

• NZD/USD: RBNZ needs to deliver 50bps hike and hawkish guidance to strengthen the kiwi – MUFG