VIEW: KiwiBank: Hike With No Cause For A Pause, The Risk Of Overtightening Grows

KiwiBank note that “the RBNZ’s assessment was much more hawkish than we expected. We expected a softening in tone. Although we had forecast a 50bp hike today, we had openly recommended a pause. And we expected to see a lowering of the OCR track. We had made the argument for a pause at today’s meeting given the devastating impact of cyclone Gabrielle. The RBNZ had paused in August 2021 as the country went into lockdown. We thought it wise to pause again. It was not to be.”

• “More importantly, global disinflation and the rapidly rising risks of a regrettable recession were not enough to soften the RBNZ tone (yet). The RBNZ’s OCR track was effectively unchanged. The near-term track was lowered a little, as they delivered 50bps, not 75bps as implied last year. But the track over the medium term was identical to the one delivered in November. The cash rate is forecast to hit 5.5% by year-end, and any thoughts of rate cuts are held deep in 2024.”
• “We continue to highlight the risk of overtightening. And we expect the OCR track to be lowered, now later in the year.”
• “Financial markets have the RBNZ’s OCR track largely factored in, at least in the near-term.”