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MNI BRIEF: RBNZ 50bp Hike Odds Firm After Softer Jobs Data

MNI (PERTH)
(MNI) Perth

The Reserve Bank of New Zealand could lean towards a 50bp hike later this month after Q4 labour data showed the tightness in the labour market may have peaked, according to StatsNZ.

While the jobs market remains red-hot, the unemployment rate edged up to 3.4% from 3.3% and the underutilisation rate rose to 9.4% from 9%. However, the Labour Cost Index rose from 3.7% y/y in Q3 to 4.1% y/y - the largest annual increase since the series began in 1992. The labour data comes after a lower-than-expected Q4 inflation print (See MNI BRIEF: RBNZ Inflation Fears Fall Short, 50bp On Radar)

The CPI and labour market data have prompted traders to pare back pricing for a 75bp hike at the February 22 meeting, with 50bp increase to 4.75% seen more likely. Overnight indexed swaps have priced in a hike of 56bp. (See NZGBS: Curve Bull Steepens, RBNZ Terminal OCR Pricing Lower In Wake Of Labour Market Data)

Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

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