RBNZ Rate Hike Decision Hinges on OCR Forecast

The Reserve Bank of New Zealand (RBNZ) is widely expected to raise its Official Cash Rate (OCR) by 25 basis points to 2.75% on September 2, but what's more important than the hike itself is the accompanying rate forecast.

According to ASB and Westpac, two major New Zealand banks, the RBNZ will likely keep climbing to 3.25% by year-end, with ASB considering this level 'neutral' for the economy. However, Westpac sees a 10-15% probability of reaching this target, treating it as a more hawkish scenario.

The RBNZ's voting history shows how the policy debate has shifted from split decisions to unanimous support for raising the OCR. But despite this progression, there is still disagreement over what comes next, with two members seeing inflation risks tilted to the upside and four judging them broadly balanced.