Westpac: Turning Point Being Reached Quicker Than RBNZ Assumed

Westpac note that “In its November Monetary Policy Statement the Reserve Bank was already bracing for some strong results for the December quarter, with the unemployment rate expected to drop back to 3.2% and annual wage growth to keep accelerating. Beyond that, though, the RBNZ was looking for a rapid deterioration in the labour market, with unemployment rising to 4.8% by the end of this year. In that light, today’s results may have been softer than the RBNZ expected for the quarter, but right in line with their broader view – at most, you could argue that the labour market has reached a turning point three months earlier than they assumed.”

• “Our forecast remains for a 50 basis point increase in the OCR at the 22 February review (shaded down from 75bps after last week’s inflation figures), and another 50bp hike in April to reach a peak of 5.25%.”