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Reserve Bank of New Zealand Expected to Hike Cash Rate to 2.75% in September, ANZ Says

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The Reserve Bank of New Zealand is expected to hike the official cash rate (OCR) by 25 basis points at its September meeting, taking the rate to 2.75%, ANZ Research said in a note on Tuesday.

Recent developments have been mixed, with near-term inflation data, on balance, a little more benign than anticipated. On the other hand, some data have suggested that the output gap may not be as deeply negative as assumed by the central bank. First quarter gross domestic product was slightly weaker than the May forecast, while consumer confidence and business confidence have rebounded sharply as fuel prices have eased.

The central bank is worried about the potential for inflation to be stickier than they are assuming. It makes sense for the Reserve Bank to continue along the path of getting the OCR back closer to neutral in the face of upside risks to inflation.

So far, markets are pricing in slightly greater odds of a hike in December than in October.

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