The OCR track, which peaks 9bp above the current level of 5.5%, indicates that the RBNZ still sees some upside risk overall. However, the evidence threshold for more hiking being required is clearly much higher than we took from the tone and OCR forecast of the November MPS. We still think there is a very strong chance that the next move in the OCR is up rather than down. The focus on headline rather than non-tradable inflation is risky in our view, given domestic inflation is looking very persistent. But in the MPS today, the RBNZ has made it clear that they are going to take quite some persuading that more hikes are required. Therefore, although our view of the job facing the RBNZ hasn’t changed, we have reluctantly parked our call for a higher OCR back in the risk basket, and instead pushed out cuts to mid-2025.
We will be watching the data just as closely as the RBNZ. Next stop, Q4 GDP on 21 March, then the April Monetary Policy Review, followed by Q1 CPI. - ANZ
Comments