MNI RBNZ Review - October 2022: No Pivot On This Side Of Tasman

EXECUTIVE SUMMARY

• The RBNZ raised the OCR to the tune of 50bp on Wednesday and signalled continued determination to bring price pressures under control. While the rate decision matched broad consensus and was fully priced by the market, it was the accompanying statement that stole the limelight. The Reserve Bank sharpened its hawkish rhetoric at the margin, cementing its position as one of the leaders of the global tightening campaign.
• In a surprising twist, the summary record of the meeting revealed that members debated whether to increase the OCR by 50bp or 75bp, although virtually no sell-side analyst had pencilled in the latter outcome. Admittedly, the August statement mentioned discussions on the merits of “more rapid increases.” But an explicit mention of a 75bp rate hike pointed to a somewhat more serious debate on the matter.
• The reception the RBNZ’s language was accentuated by the impression left by the latest monetary policy review across the ditch. On the eve of the RBNZ meeting, colleagues from the RBA unexpectedly slowed the pace of their rate increases to 25bp. The RBA’s dovish pivot primed some market participants to expect a similar change of tack in New Zealand. These expectations not only failed to materialise, but met with a firm pushback in the way of an unambiguously hawkish statement released by the RBNZ.

Click here to see the full review: MNI RBNZ Review October 2022.pdf