VIEW: Westpac: Lower OCR Peak Now Expected

Westpac have revised down their “forecast for Official Cash Rate hikes from the RBNZ. We now expect a 50 bp rise in the OCR at the February policy meeting (previously we expected a 75 bp rise).”

• “We continue to expect another 50 bp increase in April, but that will be dependent on the strength of economic conditions.”
• “Inflation pressures have remained strong. However, the acceleration in inflation that the central bank was forecasting has not eventuated.”
• “At the same time, signs of a downturn in demand are developing. And with mounting pressure on household balance sheets, a stark slowdown in economic activity is expected over the coming year.”
• “Against this backdrop, further increases in the OCR are still required to bring inflation back inside the RBNZ’s target band. However, it now appears that the extent of those increases doesn’t need to be as large as we (or the RBNZ) had previously assumed.”