VIEW: ASB: Swift Action Still On The Cards

ASB note that “the RBNZ continued to use similar language to its recent statements, though on balance the statement had a firm undertone – which financial markets have responded to. The RBNZ evidently remains of the view that its ‘least regrets’ path is to get the OCR up to the peak (whatever that may be) as soon as possible, rather than risk dragging out the tightening cycle and needing to eventually lift the OCR to an even higher level. All the recent messages around increasing the OCR at pace, being resolute and committed to getting inflation under control remained. Moreover, the RBNZ (again) said it had discussed the merits of a 50bp vs. 75bp, notwithstanding that this time around the OCR starting point is even higher.”

• “We continue to expect a 50bp increase in November, followed by a 25bp lift in February to 4.25%. At this point, inflation pressures remain acute and activity – although muted – appears to be still increasing. After November’s OCR decision it is a three-month gap until the February meeting. An awful lot can happen in that time, though the risks remain skewed towards the RBNZ doing more in 2023 than just a 25bp increase, particularly if capacity and cost/price measures are slow to ease.”