Will The RBNZ Go 25bps or 50bps?

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Markets are pricing in a 100% chance of a 25bsp hike by the RBNZ this upcoming week, but after the recent macro data there are some analysts that are leaning towards the possibility of a 50bsp hike.

The vast majority of the recent New Zealand macro data has come in much better than both the markets and the RBNZ had projected. GDP for Q3 printed at 2.8% versus the RBNZ’s expectations of 0.8%.

Headline CPI YY printed at 4.9% versus RBNZ projections of 4.1%. The Unemployment Rate printed at 3.4% versus the RBNZ forecasts of 3.9%. That is the lowest print going back to 4Q of 2007. Housing prices continues to rise, terms of trade are looking solid, inflation expectations are getting uncomfortably high.

So, with all of that there is certainly scope for a 50bsp hike, but consensus is still leaning towards a 25bsp, as a 50bsp hike seems unnecessarily aggressive given that the bank is still expected to raise rates 6 more times in this cycle.

As always, we have more on this and how we look to potentially take advantage of it in our week ahead video.