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VIEW: Westpac Stick With Peak OCR Call Of 5%, Note Hawkish Risks


Westpac note that "the Reserve Bank has increased the Official Cash Rate by 75 basis points to 4.25%. The size of the move was generally expected by economists and financial markets."

  • “The big surprise was in the projected OCR track. The RBNZ expects the OCR will need to rise to a peak of 5.5% next year (compared to a 4.1% peak in its August forecasts).”
  • “The RBNZ sees inflation as deeply embedded in the New Zealand economy. It now believes that a recession will be needed to bring inflation back within the 1-3% target range in the coming years.”
  • “Even then, it has substantially upgraded its inflation forecasts compared to August, and is not expecting inflation to drop below 3% until the second half of 2024.”
  • “The Monetary Policy Committee also discussed the possibility of a 100 basis point increase today, but settled on a 75 point increase, noting the lagged effects of past interest rate hikes.”
  • “Our current forecast is for a 5% peak in the OCR by early next year. In our view this remains sufficient to bring inflation under control, with borrowers about to encounter substantially higher retail interest rates in the coming months.”
  • “However, the risk is clearly for a higher peak in the near term, given the RBNZ’s inclinations.”
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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