Analysis on the Reserve Bank of New Zealand OCR track ahead vai KiwiBank.
This in brief from a more detailed note:
- Given the array of better-than-expected data, the RBNZ's forecasts will be shunted higher. Monetary policy is simply too loose for an economy running through full employment. And inflation is 2%pts above the top of the RBNZ's mandated 1-to-3% target band.
- We expect the RBNZ to adjust their OCR track by pulling forward forecast hikes, and pushing higher the end point.
- RBNZ is likely to move the OCR track in keeping with our forecast for the cash rate to reach 2%, by this time next year.
- Beyond 2022, the OCR track is likely to mechanically push toward a higher end point of ~2.4% - upgraded from the prior end point of 2.1% from the August MPS.
But say the analysts, market pricing for the extent of hikes is likely overdone:
- Despite the inevitable lift in the RBNZ's OCR track, the reaction in financial markets may be muted ... At this stage in the cycle, we feel rates markets have been pushed too far. ... financial markets have moved too far, too fast.
The next hike from the RBNZ is likely to be later this month:
