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📝 Expect Another 50Bps Rate Hike From The RBNZ In July: Scotiabank

The RBNZ published an updated Monetary Policy Statement today and revised the forecast for the OCR notably higher. It foresees the key rate reaching 3.4% by the end of this year vs. the February projection of 2.2%. The policy rate is expected to rise further in the first half of 2023, reaching the cyclical peak of 3.9% by June. We expect inflation to remain elevated in the medium-term. We foresee another 50bps hike in July Tighter monetary conditions and some cooling in economic activity will allow demand-driven price pressures to start easing in the second half of the year, with headline inflation forecasted to close 2022 at slightly above 5% y/y. We expect New Zealand’s real GDP to grow by around 3% in 2022 following a 5.4% gain last year. Such cooling is welcome, as the RBNZ assesses that employment is currently above its maximum sustainable level. The economy is facing labour shortages, with access to labour being the key constraint on firms’ productive capacity. Accordingly, wage inflation is expected to accelerate further from the 5.3% y/y pace recorded in Q1. - Scotiabank Economics


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