📝RBNZ Could Lift OCR Projection to 6.0% In May: ING

An above-expectations fiscal boost and improved growth expectations inevitably put pressure on the RBNZ to signal a higher peak at this week’s meeting. Markets are pricing in a peak at around 5.80%, but we think the RBNZ can deliver an extra bit of hawkishness and signal tightening until the 6.00% mark as it hikes by 25bp this week.

That would have positive implications for NZD in the near term. AUD/NZD has been on a descending pattern over the past week and we could see the 1.0485 December lows being tested on the back of RBA-RBNZ divergence. Still, our view remains that the RBNZ will be forced to start cutting rates as early as in the fourth quarter as inflation could prove less resilient than expected, the Fed starts its own easing cycle and global economic conditions deteriorate.

- ING