RBNZ expected to decide 50bps hike in August

The Reserve Bank of New Zealand is expected to stick to its hawkish stance and go on with a fourth straight half-point rate hike, in August, continuing its most aggressive tightening in over two decades in an attempt to control the country’s stubbornly-high inflation,” as per the latest Reuters poll published early Friday morning in Asia.

Inflation was expected to fall within the target range of 2%-3% in the second half of next year, a separate Reuters poll showed.

Key Findings

All 23 economists in the Aug. 8-11 Reuters poll forecast rate setters at the RBNZ would hike its official cash rate by another 50 basis points at its Aug. 17 meeting, taking it to 3.00%. It was 1.00% before the COVID-19 pandemic.

All but one of the 23 economists polled also forecast rates to reach 3.50% or higher by the end of 2022 in what would be the most aggressive policy tightening since the official cash rate was introduced in 1999.

While the RBNZ has signaled plans to increase the rate to 4.00% by mid-2023, almost matching the U.S. Federal Reserve, few economists in the poll said it would go that far.

Only five of 23 economists predicted rates would reach 4.00% by end-2022, up from one in the previous poll.

Twelve of 19 respondents forecast the cash rate to either stay steady at 3.50% or be lower by end-2023. The remaining seven predicted it would climb to 3.75% or higher by then.