VIEW: ASB: RBNZ Sticks To Its Script

ASB note that “the RBNZ lifted the OCR by 50bp, where expectations had been centring ahead of the devastation wrought by Cyclone Gabrielle. There was some speculation that the RBNZ would keep the OCR in hold for the time being. There was a case for doing so, with a state of emergency in place, some people still unaccounted for and the full damage picture far from clear. But the impacts of weather disasters will only make the RBNZ’s job of curbing inflation more challenging. And the Government, banks and relief agencies will together be far more targeted in getting support to those who need it. “

• “Our assessment is that inflation will be even stronger, particularly in the short term. But there will also be some lingering impacts out a couple of years that will be relevant for the RBNZ’s job. The RBNZ itself has noted it will look through the short-term impacts of the disaster and focus on the medium term. It has boosted its GDP outlook around 1% over the medium term to factor in a rebuilding boost.”
• “We continue to expect a 50bp rate increase in April. There is the risk the RBNZ does do more over time, as its own forecasts indicate and in line with its bias of upside risks to the inflation outlook. And the RBNZ’s forecasts are more consistent with three 25bp moves, rather than yet another 50bp increase. But there is a lot of information to work through over the next couple of RBNZ decision windows.”