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MNI RBNZ Preview - August 2022: All Eyes On Forward Guidance

There is broad consensus that the RBNZ will raise the OCR by another 50bp, with forward guidance set to provide most interest.

EXECUTIVE SUMMARY

  • Another expectation-busting inflation report released out of New Zealand keeps pressure on the RBNZ to raise interest rates, despite reassuring data on inflation expectations and an unexpected uptick in the unemployment rate. Still, prices are growing at a pace that is well beyond the RBNZ's tolerance band, while the labour market remains extremely tight.
  • Headwinds to growth are intensifying and may eventually force policymakers to reconsider their aggressive approach to inflation-fighting. The 2-year/10-year segment of NZGB yield curve recently flirted with inversion for the first time since 2015 as the economy is hitting speed bumps.
  • With a 50bp OCR hike seen as a done deal this week, the focus will fall on the Reserve Bank's forward-looking comments, with particular emphasis on the OCR track. The tone of this MPS will be set by the combination of hints on how policymakers are planning to handle the inflation/growth dilemma further down the road.

Click here to see the full preview: MNI RBNZ Preview August 2022.pdf

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EXECUTIVE SUMMARY

  • Another expectation-busting inflation report released out of New Zealand keeps pressure on the RBNZ to raise interest rates, despite reassuring data on inflation expectations and an unexpected uptick in the unemployment rate. Still, prices are growing at a pace that is well beyond the RBNZ's tolerance band, while the labour market remains extremely tight.
  • Headwinds to growth are intensifying and may eventually force policymakers to reconsider their aggressive approach to inflation-fighting. The 2-year/10-year segment of NZGB yield curve recently flirted with inversion for the first time since 2015 as the economy is hitting speed bumps.
  • With a 50bp OCR hike seen as a done deal this week, the focus will fall on the Reserve Bank's forward-looking comments, with particular emphasis on the OCR track. The tone of this MPS will be set by the combination of hints on how policymakers are planning to handle the inflation/growth dilemma further down the road.

Click here to see the full preview: MNI RBNZ Preview August 2022.pdf