VIEW: ANZ: Hope Is Not A Strategy

ANZ note that “as was widely expected, the RBNZ lifted the Official Cash Rate (OCR) 75bp to 4.25% today with the release of its Monetary Policy Statement (MPS).”

• “The tone of the Statement was even more hawkish than we expected. We have revised up our forecast OCR track, adding to our existing 75bp hike in February a 50bp hike in April and a 25bp hike in May, which would take the OCR to a peak of 5.75%.”
• “The RBNZ noted that they “gave consideration to an increase in the OCR of 75 or 100 basis points.””
• “The RBNZ’s updated OCR forecast reaches a peak of 5.5% by end-2023, a huge upgrade versus the August MPS forecast of a peak of 4.1%. Cuts are pencilled in for the second half of 2024 (endpoint: 4.35% at end-2025).”
• “The 140bp upward revision to the forecast OCR peak is massive, but so too have been the upside surprises to inflation, inflation expectations, and the wage outlook in recent months. The RBNZ estimates that the short term nominal neutral interest rate is 3.6%, reflecting high inflation expectations.”
• “The RBNZ is now forecasting a recession, with GDP to fall 1% peak to trough, with four consecutive quarters of negative growth – that appears to be what they now believe is unfortunately necessary to bring inflation down from what’s looking like regrettably sustained highs.”