VIEW: ASB Now Sees Need For 50bp Hike In May

ABS note that “it was clear that the OCR needed to go up, but views were split on how much. The RBNZ hiked by 50bps citing the least regrets motivation, with a ‘stitch in time’ approach needed to best maintain price stability and support maximum sustainable employment. The RBNZ are clearly worried about the (upwardly revised) near-term inflation outlook and the risk that inflation expectations stray from the inflation target. Importantly, however, the RBNZ did not employ forward guidance on future OCR levels, with the Bank also concerned over the global outlook and noting the tightening in NZ financial conditions of late and in the pipeline. We have changed our OCR outlook and expect the RBNZ to swiftly move the OCR to circa 2% neutral levels in May (i.e. 50bp hike), followed by a sequence of 25bp hikes to a 3.25% OCR peak this cycle.”