RBNZ Preview: Forecasts from eight major banks, hawkish stance warrants 50 bps

The Reserve Bank of New Zealand (RBNZ) will announce its monetary policy decision on Wednesday, October 5 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 eight major banks.

RBNZ is expected to hike the Official Cash Rate (OCR) by 50 basis points (bps) to 3.50%. Such a hike would mean the central bank hiked policy rates by 50 bps for the fifth meeting in a row. The focus will be on RBNZ’s policy guidance.

ANZ

“We expect the RBNZ will raise the OCR 50 bps to 3.50%. On balance, local data since the August MPS has not brought any large surprises. But global central banks have become a lot more hawkish. We continue to expect OCR to reach a peak at 4.75% by mid-2023.”

Westpac

“We now expect the OCR to reach a peak of 4.5% (previously 4%). This week, the RBNZ is likely to hike by another 50 basis points to 3.5%, and signal further increases ‘at pace’.

TDS

“Employment is above sustainable levels and Q2 GDP handily beat expectations. We think the RBNZ needs to bring the OCR well above 4% to cool demand in line with supply, so as to ease inflation pressures. Markets will watch if the RBNZ retains its forward guidance of tightening ‘at pace’ for any indication of a step down to 25 bps hikes.”

Citibank

“With expectations of further global central bank tightening and New Zealand’s labor market characterized by record-high demand for labor, we expect a 50 bps hike from the RBNZ together with a hawkish statement. A move to 3.50% by the RBNZ this week is likely to be followed by a further 50 bps hike to be delivered on 23 November 2022 and a final 25 bps OCR increase on 22 February 2023 to a terminal rate of 4.25% with rate cuts expected starting Q1 2024.”

Wells Fargo

“We expect the RBNZ to hike rates by 50 bps to 3.50%. Seeing as the RBNZ now expects inflation to remain elevated for longer, we expect additional rate hikes in the months to come until we are closer to the 4% range.”

Danske Bank

“We expect another 50 bps hike to 3.50% in line with consensus.”

NAB

“We expect the MPC to lift the OCR 50 bps, to 3.50%, and sanction the likelihood of another 50 bps, to 4.00% at November’s MPS.”

UOB

“At this RBNZ meeting, we are penciling in a 50 bps hike in the OCR to 3.50%. We believe the RBNZ is on track to hike the OCR to 4.00% by the end of this year, though risks remain skewed towards more rate hikes in 1Q23, and thus an OCR higher than 4%, before the RBNZ pauses in the current tightening cycle.”