Can The RBNZ Be Hawkish Enough?

There are a lot of aggressive expectations for the rate path of the RBNZ in the months ahead with over 100 basis points of tightening implied by OIS markets between now and Q1 2022.

The question about this week’s meeting isn’t whether or not the bank will hike rates, that much is already priced in. The real question is whether the bank will be able to live up to the market’s expectations.

The bank certainly has reasons to feel optimistic with inflation at decade highs, growth above Q4 2019 levels and unemployment back to pre-covid levels at 4.0%.

Apart from that, with housing now part of the bank’s remit, the fact that house prices are 20%-30% higher than a year ago is another reason for a hawkish bank.

However, with a lot of hikes already implied, there is a risk that the RBNZ could come out more balanced.

As always, we’ll explore this topic in-depth in this week’s video.