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MNI RBNZ Review - February 2023: OCR Peak Still 5.5% But Softer Tone

EXECUTIVE SUMMARY

  • The RBNZ unanimously agreed to hike rates by 50bp to 4.75% at its February meeting, as was widely expected. The peak in its OCR forecasts was unchanged at 5.50%, implying another 75bp of tightening. The question is whether there will another 50bp increase at the April 5 meeting followed by 25bp in May or three 25bp moves at the next three meetings. Given that Governor Orr said that policy is now restrictive and the Committee has more flexibility, there is a good chance of another step down to 25bp in April.
  • There was little change to the RBNZ's forecasts. Inflation is still expected to be within the target by Q2 2024. The first estimate of the impact on output from Cyclone Gabrielle was an additional 1pp over time. The disaster is expected to boost inflation and cut output in the near term but then rebuilding should boost activity and inflation later.
  • Following the meeting and statement, the market lifted terminal OCR pricing to 5.45% (October) and scaled back policy easing expectations for later in the year.

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MNI RBNZ Review - Feb 23.pdf

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