RBNZ Interest Rate Hikes Still on Track Despite Softer Inflation Outlook

New Zealand's Reserve Bank is still expected to hike interest rates despite a softer inflation outlook. According to the latest survey from the RBNZ, business leaders and professional forecasters expect further increases to the official cash rate before year end.

The OCR currently sits at 2.5%, following a 25-basis-point increase in July. Forecasters put the mean expected OCR at 2.73% by the end of the September quarter, up 39 basis points on the prior survey. The one-year-ahead expectation lifted 20 basis points to 3.21%.

Westpac senior economist Satish Ranchhod said the RBNZ had already flagged more tightening to come. 'The RBNZ hiked the official cash rate 25bps at their last policy meeting in July and signalled further hikes over the coming months,' he wrote, adding: 'We're forecasting two more 25bp hikes this year, most likely at the RBNZ's September and December meetings.'

ASB shares a similarly hawkish view. Senior economist Mark Smith wrote that a '3.25% by year end beckons,' with a higher OCR possible into 2027 should inflation prove more persistent than currently expected.