VIEW: ASB Doesn’t See Need For Rate Hikes, Pushes Out Easing

ASB doesn’t think another rate hike is needed as inflation is still headed to achieve target within a reasonable timeframe but notes that while headline inflation is moderating, “some elements are proving to be sticky”. Thus it has pushed out its first rate cut from August to at least November, the same change that BNZ made yesterday.

• “The RBNZ announces its next OCR decision on Wednesday 28th February.Importantly, we don’t think the RBNZ will raise the OCR at this meeting, though it’s a closer call than it has been for a while.”
• “The prime issue for the RBNZ is having confidence around when inflation will get back in the 1-3% target band, with the RBNZ aiming for 2% inflation.The RBNZ remains worried about the persistent sources of inflation.”
• “The inflation-generating process is less clear than it was, after a period of considerable global economic upheaval.Economic data are at a turning point, which can make deciphering trends more challenging.”
• “The key message for people is that uncertainty is likely to abound for a while.And as we get fresh data, it’s likely to keep swinging around perceptions of when the RBNZ will finally be confident enough to cut the OCR.”