MNI RBNZ Preview - July 2023: Ready To Watch & Wait

EXECUTIVE SUMMARY

• In May the RBNZ hiked rates 25bp to be in line with its updated but unchanged Q2 2023 OCR forecast of 5.5%. This last hike gave the Committee confidence that it had done enough to contain inflation and with that it shifted to a neutral stance.
• With the data since then generally showing slowing activity, even if confidence is off its lows, survey measures of inflation continuing to gradually ease, and rates in line with the RBNZ forecast, it is likely to be on hold on July 12 for the first time since August 2021. Markets have very little priced in for July.
• Elections will be held in October and so after July, the last possible meeting for policy adjustment is August 16, which will also include revised RBNZ forecasts. Before then Q2 CPI prints on July 19, employment/wages August 2 and inflation expectations August 9 plus the usual monthly data including card transactions. If this data shows continued easing in inflation, demand and capacity pressures, then rates are likely to be held at 5.5% again, which would probably be the terminal rate.
• Full preview is here:

RBNZ Preview - July (final).pdf