RBNZ Survey Supports Case for Additional Hikes

The New Zealand Dollar (NZD) saw a brief dip below its 200-day moving average after the Reserve Bank of New Zealand (RBNZ) released its Q3 inflation expectations survey. The survey showed mixed but well-anchored readings near the 2% midpoint, with one-year-ahead annual CPI inflation decreasing by 81bps to 2.60%, and two-year ahead decreasing by 19bps to 2.34%. However, five-year-ahead increased by 9bps to 2.31%, and ten-year ahead increased by 1bps to 2.20%.

Elias Haddad from Brown Brothers Harriman notes that despite the survey's mixed results, above target inflation, stronger domestic growth, and a policy rate near the lower end of neutral argue for additional RBNZ hikes. Swaps fully price in 75bps of tightening over the next twelve months to 3.25%, which bodes well for the NZD.

The RBNZ's credibility is underscored by inflation expectations remaining close to the bank's 2% target midpoint, but the survey supports the case for further tightening. With a policy rate near the lower end of neutral and above target inflation, additional hikes are likely.