RBNZ: Market fully pricing rate hike by Mar-18 - Westpac

Imre Speizer, Research Analyst at Westpac, explains that the market pricing for the RBNZ has firmed during the past week, now fully pricing a rate hike for March 2018 (from May 2018 previously).

Key Quotes

“The main catalysts for this repricing were the upside surprise from NZ’s Q1 CPI release, and waning global risks. We see the effect of the former as persisting for some time, not least because there is an RBNZ MPS on 11 May.”

“NZ CPI inflation at 2.2% annual is well above the RBNZ’s 1.5% forecast. While some of the causes for the rise are temporary (food, fuel) a significant upgrade to the RBNZ’s inflation forecasts is likely at the MPS. In addition, the NZD TWI is 4% below the RBNZ’s forecast. The monetary policy implication of these surprises in unambiguously hawkish, and we will be very interested in how the OCR projection is shifted (time or value or both?)”