Resumption of Rate Hike: Westpac Sees NZ Reserve Bank Raising OCR to 2.75%

In the context of global macroeconomic trends, Westpac forecasts that the Reserve Bank of New Zealand (RBNZ) will raise its official cash rate (OCR) by 25 basis points to 2.75% at the upcoming monetary policy meeting. This decision aligns with a broader trend of monetary normalization, especially considering the persistent high inflation in both emerging and developed markets. However, Westpac expects this move to be more indicative of macroeconomic stability rather than a clear signal for future hikes. The bank assigns a low probability range of 10-15% to hawkish or dovish surprises, suggesting that the base scenario is likely to prevail. This decision should not provoke significant market reactions as there is already broad consensus on the path forward. However, market focus may shift more towards the inflation and growth forecasts rather than the actual rate hike itself. The NZD TWI is currently above the RBNZ's May assumptions, indicating a slightly tighter financial condition, which could be referenced by the central bank. Westpac’s perspective suggests that further hikes will likely be necessary through 2027 due to persistently high core inflation, diverging from the passive and data-dependent approach of the RBNZ.

Source: ForexLive (InvestingLive)