VIEW: Westpac Now Look For 4.00% Peak In OCR

Westpac note that “the New Zealand labour market remains extremely tight. While the unemployment rate rose slightly, the other survey details point to severe capacity constraints and intensifying wage pressures. We now expect the Reserve Bank to lift the OCR to a peak of 4%, most likely by the end of this year. The recent resurgence of inflation has been due to a complex mix of supply-side shocks and overheated demand. In our view, today’s results tip the balance of responsibility for inflation a bit more towards ‘Team Demand’. That in turn means that monetary policy will hold more of the burden of adjustment. We continue to expect a 50 basis point increase in the OCR at the 17 August review, with a signal of more to come.”