RBNZ Set for OCR Hike Amid Inflation Pressures

RBNZ policymakers are expected to raise the OCR (Official Cash Rate) to 2.75% at their upcoming meeting, according to market odds and economist views.

The decision is driven by headline inflation surpassing the 1%-3% target band, with a second-quarter reading of 4.1%. This acceleration is attributed to increases in oil, air travel, and other costs due to the conflict involving Iran.

Economists like Sharon Zollner from ANZ Bank believe it's sensible for RBNZ to continue normalizing the OCR, given upside risks to inflation and a starting point above the target band. 'We expect the RBNZ to get on with the job at this meeting and the next one,' she said.

While growth has faltered under higher living expenses, expectations for a second-half rebound are adding to price pressures. Kelly Eckhold from Westpac cautions that supply-side shocks may not subside quickly enough, but acknowledges that core inflation remains too high.