VIEW: ASB Now Look For 25bp Hike In April, Don't Change Peak Call

In lieu of Q4 GDP data ASB note "its evident substantial headwinds are building for the NZ economy over the medium term. Headwinds to growth are manyfold. With inflationary pressures proving stubbornly persistent, the RBNZ has implemented a substantial amount of monetary tightening to cool the economy already, with much of the impact still not entirely felt. A cooler housing market is likely to weigh on construction. Cost of living challenges, higher debt servicing cost and soggy consumer confidence will soften consumer spending. Slowing global growth will cap demand for NZ exports. All up, the NZ economy has proven very resilient thus far, but a recession in 2023 is a distinct possibility."

• "We have tweaked our OCR view. Inflation remains much too high, and the near-term outlook is especially worrisome. However, the weaker starting point for economic activity and increased financial markets jitters overseas tip the balance a little in favour of a more cautious approach to any further tightening at the coming RBNZ meetings. Uncertainty is elevated but we expect the Bank will want to move in smaller increments from here, and now expect two 25bps OCR hikes at the next two meetings, instead of a 50bps lift in April (maintaining our 5.25% OCR peak view). We do not expect OCR cuts until mid-2024 but pronounced weakness in NZ economic activity could well see these bought forward if they translate into cooling labour market pressures and sharply lower inflation."