All eyes on the RBNZ

On November 1 New Zealand house prices showed the first sign of strain, with their first annual fall in more than 11 years. Prices fell 0.6% from the previous year, and values fell for a 7th consecutive month. This is due to the affordability challenge for buyers either getting new or applying for mortgage extensions. According to Bloomberg, some economists are projecting a 13% fall in house prices this year, with further falls in 2023 and a peak-to-trough slump of 18-20%. The impact of higher interest rates is being felt.

The Reserve Bank of New Zealand (RBNZ) will announce its monetary policy decision on Wednesday, November 23 at 01:00 GMT. As we get closer to the release time, here are the expectations as forecast by the economists and researchers of seven major banks.

Citibank

“We expect the RBNZ MPC to steepen its pace of rate hikes in November and lift the OCR by 75 bps to 4.25%, cementing the RBNZ as one of the more hawkish central banks globally. This will take monetary policy well into restrictive territory (above the average neutral estimate of around 2%). The acceleration in rate hikes from 50 bps to 75 bps would come from a combination of a tight labor market, an acceleration in wages, and higher-than-expected inflation in Q3. We also expect large upward revisions to inflation forecasts in the November SMP. The team also pencils another 50 bps hike in February after which the RBNZ will likely pause for the remainder of 2023, implying a terminal policy rate of 4.75%.”

Westpac

“We expect the RBNZ to raise the OCR by 75 bps to 4.25%. Recent data has pointed to mounting inflation pressures, raising concerns that the Reserve Bank has fallen behind the pace despite its relatively early start to rate hikes. We expect the OCR to peak at 5% by early next year. And the RBNZ’s preferred ‘stitch in time’ approach means that it will be looking to head off the risk of an even higher peak.”

ING

“We expect the RBNZ to hike by 50 bps and signal a peak rate around 5.0%. The ongoing downturn in the housing market and worsening external conditions argue against a larger, 75 bps move. We are not fully convinced the RBNZ will ultimately deliver all its projected hikes, but a dovish pivot is unlikely on the cards at this stage.”