ASB Alter RBNZ View

ASB note that "the Q4 unemployment rate fell to 3.2%, a record low for the post-1986 quarterly history of the Household Labour Force Survey. The HLFS was bang on with ASB expectations and suggests that employment ended 2021 above its maximum sustainable level. We have changed our OCR call in light of the tight labour market and high medium-term inflation outlook. A steady pace of 25bp hikes is expected each meeting, with the OCR now peaking at 2.75% in early 2023. Risks to the OCR onlook are two-sided. On the downside, the tightening in financial conditions would hit the housing market, crimp domestic spending, and require more moderate OCR tightening. On the upside, inflation could prove to be more ingrained and capacity pressures more intense than is commonly assumed."