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10 Mar 2014
Flash: RBNZ tightening cycle has arrived - BNZ
FXStreet (Bali) - RBNZ is set to hike the OCR 25bps to 2.75% on Thursday, notes Craig Ebert, Strategist at Bank of New Zealand.
Key Quotes
"Everyone expects the Reserve Bank to start taking its foot off the OCR accelerator at Thursday’s Monetary Policy Statement. “Soon” has arrived, and not before time. The markets and pollsters are wholeheartedly looking for a 25bp hike, to 2.75%, as are we. So, presuming the Bank doesn’t surprise with a 50 – much more likely than nothing at all – the real news will be in what the Bank suggests it will do with the cash rate over the rest of this year and through next. How much more to come, and when?"
"Certainly, more of a lift in the OCR than the Bank indicated in its December MPS, which, it’s worth recapping, suggested, at most, a 3.50% policy rate by the end of this year and something more like 4.50% by the end of 2015."
"Since the last MPS the domestic economic news has, by and large, continued very much on the up. This includes, by the way, the astounding heights in the terms of trade, which have more than accounted for the stronger than expected currency, compared to the Bank’s assumptions. Generally speaking, the growth indicators have ripped even higher, while many key pricing indicators have perked up. The Bank will have to increase its GDP and CPI forecasts accordingly. It’s just the extent of it we’ll be checking on."
"As for our latest forecasts of the economy, and their implications for RBNZ policy, please refer to our note of last Friday. Its title, “Inflation to Breach RBNZ Band”, should make our biases clear. The pressure’s on."
"With all of the positive local news, we can understand why the market’s now largely pricing a further couple of 25 point hikes at the April OCR Review and June MPS, with 3.25% surely seen by July. And, why the RBNZ will probably infer this in its 90-day bank bill track on Thursday. We have long liked the chances of the OCR getting to 3.25% by June 2014."
Key Quotes
"Everyone expects the Reserve Bank to start taking its foot off the OCR accelerator at Thursday’s Monetary Policy Statement. “Soon” has arrived, and not before time. The markets and pollsters are wholeheartedly looking for a 25bp hike, to 2.75%, as are we. So, presuming the Bank doesn’t surprise with a 50 – much more likely than nothing at all – the real news will be in what the Bank suggests it will do with the cash rate over the rest of this year and through next. How much more to come, and when?"
"Certainly, more of a lift in the OCR than the Bank indicated in its December MPS, which, it’s worth recapping, suggested, at most, a 3.50% policy rate by the end of this year and something more like 4.50% by the end of 2015."
"Since the last MPS the domestic economic news has, by and large, continued very much on the up. This includes, by the way, the astounding heights in the terms of trade, which have more than accounted for the stronger than expected currency, compared to the Bank’s assumptions. Generally speaking, the growth indicators have ripped even higher, while many key pricing indicators have perked up. The Bank will have to increase its GDP and CPI forecasts accordingly. It’s just the extent of it we’ll be checking on."
"As for our latest forecasts of the economy, and their implications for RBNZ policy, please refer to our note of last Friday. Its title, “Inflation to Breach RBNZ Band”, should make our biases clear. The pressure’s on."
"With all of the positive local news, we can understand why the market’s now largely pricing a further couple of 25 point hikes at the April OCR Review and June MPS, with 3.25% surely seen by July. And, why the RBNZ will probably infer this in its 90-day bank bill track on Thursday. We have long liked the chances of the OCR getting to 3.25% by June 2014."