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MNI RBNZ Preview – February 2024: Watching, Waiting & Worrying

RBNZ
  • The RBNZ is probably still “watching, worrying and waiting” thus there is no incentive to change rates in either direction and while we don’t expect a rate hike, we believe it will want to keep policy and thus financial conditions restrictive until it is confident that inflation will or has returned sustainably to the 1-3% target band.
  • There's a 27% probability priced in for a 25bp hike during this week's meeting, with an anticipated terminal OCR of 5.65% (reflecting a 60% probability of a 25bp hike) by the May meeting. By year-end, a cumulative 41bps of easing is factored into the pricing.
  • Given we expect the tightening bias to be retained, we also expect that the MPC will discuss a rate hike but then opt for no change. Updated staff forecasts will be presented and will be monitored for changes to the OCR path and CPI forecasts, especially upward revisions.
  • The RBNZ is likely to sound cautious and push back against rate cut expectations by saying it is too soon to talk about easing, discussing a rate hike or possibly pushing out the first cut in its OCR path. Given the high degree of uncertainty, the hold could be prolonged for most of this year.
  • See full preview here.
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