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MNI RBNZ Preview - October 2021: White Herons To Raise OCR

New Zealand's central bank seem poised to deliver a delayed OCR hike, even as Covid-19 restrictions continue to affect economic activity.

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EXECUTIVE SUMMARY

  • The RBNZ held off on a rate hike in August as they judged tightening policy a day after a renewed community outbreak of Covid-19 would pose an excessive communication challenge.
  • Fundamentally, the case for tightening remains strong even as activity is limited by Covid-19 countermeasures. The economy was at full steam before New Zealand plunged into lockdown and showed some relative resilience once the restrictions were reinstated.
  • The MPC will likely opt for a standard-sized 25bp hike rather than an outsized 50bp lift-off, in line with their adaptable "white heron" approach, whereby policymakers prefer moving in smaller steps as they assess risk environment.

Click to view the full preview: MNI RBNZ Preview October 2021.pdf