VIEW: Kiwibank: RBNZ Lifts OCR, Kicks Off 1st Tightening Cycle In 7 Years

Kiwibank note that "looking ahead we expect today's rate hike will be the first in a series of hikes towards 1.5% and possibly higher. As signalled by RBNZ Assistant Governor Christian Hawkesby, a least regrets approach will be one with "considered steps". We expect a 25bp hike to be delivered in October, November, February and May, with the OCR reaching 1.50% by the middle of next year. We expect a considered pause around 1.5%. Although the RBNZ is signalling a continuation to 2% in 2023."

• "That's an aggressive track compared to our own forecast track which struggles to rise above 1.5%."
• "A proviso to our forecast OCR trajectory is of course the current covid outbreak. The delta variant is proving more difficult to stamp out. Another 39 community cases were recorded today, and there's news that cases have spread further South. An escalation of the outbreak cannot be ruled out. A return to tighter restrictions would challenge the medium-term outlook. In keeping with their 'least regrets', considered approach, we'd expect the RBNZ to hit pause if the outlook deteriorates. Although, the Kiwi economy in aggregate is proving incredibly resilient to these disruptions. It would take a far worse disruption than we've experienced to materially change the outlook."