Goldman Sachs: RBNZ Meets Under Better Backdrop

Goldman Sachs note that "RBNZ officials will head into this week's monetary policy meeting under a backdrop of better-than-expected recent economic performance and an improved near-term fiscal position. The bank's updated path for the unemployment rate is likely to be in focus. Our economists expect forecasts will be revised lower, but still show a near-term "bump" in the path. If realized, we see the bank as likely to retain a dovish tone and maintain current guidance, though we acknowledge risks that an updated path showing sustained declines in the unemployment rate could see the RBNZ simultaneously pull forward its OCR track, thereby delivering a hawkish signal to the market. At present, markets are fully discounting a hike by September 2022, with an additional 3 hikes priced through end-2023, significantly ahead of our economists' own projection for liftoff in 1Q24. While it's possible markets press this further if the bank surprises on the hawkish side, we see risks skewed towards markets fading the extent of normalization priced by then. That being said, among the antipodean currencies we currently prefer NZD over AUD."