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MNI RBNZ Preview - February 2023: Another 50bp Amid Uncertainty

EXECUTIVE SUMMARY:

  • The RBNZ hasn't met since it hiked rates 75bp in November. A step down to 50bp is expected this month given the tentative peaking in inflation and labour market tightness, the housing correction and lacklustre activity indicators. This would bring rates to 4.75% and cumulative tightening to 450bp. The NZD OIS market has 48bp priced in..
  • There has been some talk that the central bank should hike only 25bp or even pause in the wake of Cyclone Gabrielle. But the RBNZ's responsibility is to contain inflation and look through short-term events. The government has even made comments to this effect.
  • Given inflation remains so far above target and the labour market at capacity another hike in April is probable with a smaller 25bp possible given the cumulative tightening this cycle and the lags involved. The outcome of the end-May meeting is likely to depend on the Q1 CPI data on April 20 and the wages and employment on May 3.

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