FX

RBNZ: A 50 bps rate hike next week, and more coming next – Wells Fargo

Next week the Reserve Bank of New Zealand will have its monetary policy meeting. According to analysts at Wells Fargo, high inflation and a hawkish central bank outlook sets the stage for another 50 bps hike in May to 2.00%. They expect the rate to end the year at 3.00%. 

Key Quotes: 

“The Reserve Bank of New Zealand (RBNZ) will hold its May monetary policy meeting next week against a backdrop of elevated inflation.”
“The RBNZ surprised markets with a 50 bps rate hike in April. The central bank expects CPI to peak around 7% in the first half of this year, although it believes the risk of persistent and high inflation expectations have increased. Notably, the RBNZ has asserted that the “path of least regret” is moving to a neutral policy rate sooner, which should reduce the risks of rising inflation expectations and provide more policy flexibility amid an uncertain global economic environment.”
“High inflation and a hawkish RBNZ sets the stage for another 50 bps hike in May, which would bring the Official Cash Rate to 2.00%. We then expect additional 25 bps rate hikes in July, August, October, and November, which would bring the OCR to 3.00% at the end of 2022.”
 

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