New Zealand Dollar: RBNZ seen hiking in September – UOB

UOB Global Economics & Markets Research, led by economist Lee Sue Ann, now expects the Reserve Bank of New Zealand to raise the Official Cash Rate to 2.75% at the September meeting. The change reflects persistent inflation at 4.1%, broad price increases and hawkish guidance, despite a soft labour market. UOB still anticipates only gradual further tightening, with policy remaining data dependent.

RBNZ shift toward pre-emptive tightening

“We are changing our Reserve Bank of New Zealand (RBNZ) call and now expect the Official Cash Rate (OCR) to be raised by 25bps to 2.75% at the upcoming monetary policy meeting. Previously, we had expected the OCR to remain unchanged at 2.50%, while acknowledging that risks were tilted towards further tightening.”

“The combination of headline inflation remaining well above the RBNZ's 1-3% target range, continued concerns about inflation persistence, and the Bank's earlier guidance that ”some further reduction in monetary stimulus is likely to be required“ suggests that policymakers may decide not to wait longer before delivering additional tightening.”

“Delivering another 25bps hike now would reinforce the Bank's inflation-fighting credentials while maintaining flexibility for future meetings should inflation pressures subsequently ease faster than expected.”

“As such, we view a 25bps move this week as a continuation of the RBNZ's gradual normalisation process rather than the beginning of a more forceful hiking cycle.”