VIEW: Goldman Now Expect 50bp Hike In October And 3.75% Terminal Rate

Goldman Sachs note that the RBNZ’s “forward guidance was to the hawkish side of our expectations, driven by the “incredibly tight labour market” and related stronger wages growth lifting the outlook for non-tradables inflation - notwithstanding weaker outlook for GDP growth (four consecutive quarterly contractions in private consumption to Q323), commodity prices, and house prices (peak-to-trough: ~20%).”

• “In contrast to some peer central banks, today’s MPS suggests the RBNZ is on a largely pre-set path for the OCR over the nearer term, has a high tolerance for a domestic slowdown, and is putting less emphasis on global risk. In view of this, we now expect the RBNZ to hike rates by +50bp in October (prior: +25bp). A further +50bp hike at November’s meeting is possible, but we expect the RBNZ to ease the pace of tightening to +25bp at that point (to a 3.75% terminal rate) - on clearer evidence of decelerating domestic/global inflation, large falls in house prices, and a step-down in the pace of monetary tightening globally.”