RBNZ Expected to Hike Official Cash Rate in Line with Market Pricing
TD Securities' analysts Prashant Newnaha and Howard Du predict the Reserve Bank of New Zealand (RBNZ) will raise its Official Cash Rate by 25 basis points to 2.75% in September, aligning with market expectations.
The OCR track is expected to remain broadly unchanged from May's forecast, reaching 3% by year-end and approximately 3.30% terminal, with further 25 basis point hikes projected for December 2026 and February 2027.
Newnaha stated that the RBNZ will likely hike the OCR, as 'with the Sep OCR meeting date more than 90% priced for a hike and data supporting a hike, we doubt the Board will spend much time debating the case to pause.' Pausing would add confusion to the Bank's prior messaging.
The analysts see little reason for the RBNZ's OCR projection to deviate from the May Monetary Policy Committee (MPC) forecast. They anticipate the track showing the OCR reaching 3% by year-end and terminal around 3.30%, with potential adjustments in due course if inflation forecasts are revised higher.
The growth outlook is tracking in line with the Bank's May forecasts, making it unlikely that the output gap projection has changed from the May forecast. As a result, there is no compelling case to take the OCR significantly above its current 3.30% projection.