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

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)