VIEW: Goldman Pulls Forward Rate Hike View

Goldman Sachs note that "the RBNZ left policy settings unchanged at its May meeting as expected. The MPS featured upgrades to the labour market and inflation forecasts, as well as a new OCR track that implies lift-off starting in 3Q2022. While the overall tone of the meeting statement remained mildly dovish as we expected, there were some important hawkish changes to the language around requiring inflation to be sustained 'near' the 2% midpoint (vs 'at' 2% previously) and employment 'at' its maximum sustainable level (vs 'at or above' previously). The RBNZ also removed the language that it was 'prepared to lower the OCR if required.' Taken together, the RBNZ's forecast revisions and OCR guidance today is consistent with: 1) a stronger starting point for the labour market and expected continued improvement, 2) more confidence in the baseline outlook and a further easing in downside tail risks, and 3) more caution against the risk of a significant overshoot and de-anchoring inflation expectations. Reflecting these balance of risks, we pull forward our forecast lift-off date by one year to +25bp in 1Q2023 (from 1Q2024 previously), with the risk skewed towards an earlier tightening. While this is a later lift-off than implied by the RBNZ forecast today, we see a low risk of a significant overshoot and de-anchoring inflation expectations, allowing policy settings to remain accommodative for slightly longer."