Analysis on the Reserve Bank of New Zealand OCR track ahead vai KiwiBank.
This in brief from a more detailed note:
- Given the array of better-than-expected data, the RBNZ’s forecasts will be shunted higher. Monetary policy is simply too loose for an economy running through full employment. And inflation is 2%pts above the top of the RBNZ’s mandated 1-to-3% target band.
- We expect the RBNZ to adjust their OCR track by pulling forward forecast hikes, and pushing higher the end point.
- RBNZ is likely to move the OCR track in keeping with our forecast for the cash rate to reach 2%, by this time next year.
- Beyond 2022, the OCR track is likely to mechanically push toward a higher end point of ~2.4% – upgraded from the prior end point of 2.1% from the August MPS.
But say the analysts, market pricing for the extent of hikes is likely overdone:
- Despite the inevitable lift in the RBNZ’s OCR track, the reaction in financial markets may be muted … At this stage in the cycle, we feel rates markets have been pushed too far. … financial markets have moved too far, too fast.
The next hike from the RBNZ is likely to be later this month: