📝RBNZ Is Underpricing Oil Shock Risk: Rabobank

RaboResearch maintains our forecast of the next move in the OCR being a 0.25ppt hike to arrive at the October meeting. We project a follow-up 0.25ppt hike in Q1 of next year to take the OCR up to 2.75% with a high likelihood of more to follow as the RBNZ seeks to shift monetary policy to ‘neutral’, which they estimate to be an OCR of 3-3.25%.

RaboResearch maintains a baseline forecast that the Strait of Hormuz will begin to slowly re-open from late April onwards. Even if this proves correct, the supply chain shocks from the war will be felt for months.

RaboResearch’s projections for oil prices in the quarters ahead is higher than the prices that the RBNZ seems to be basing their inflation projections upon, which leads us to think that the RBNZ’s current calm approach may bely the seriousness of the inflation risk.

Consequently, and despite the stuttering recovery in economic growth, we believe the most likely risk to our OCR forecast would be an earlier and steeper hiking cycle, as currently reflected in futures market pricing. - Rabobank