Economic Weekly: RBNZ needs to cool market’s rate expectations

The RBNZ is centre stage this week, with its first OCR announcement in 3 months as the new schedule allows the RBNZ an extended summer break. The RBNZ is widely expected to leave the OCR unchanged at 1.75%, after cutting three times over 2016. With recent inflation data lifting strongly and other economic data generally encouraging, it’s widely agreed among economists and market participants that further rate cuts are very unlikely. Instead, the focus has shifted (perhaps prematurely) to when the RBNZ will lift rates. In our weekly last week, we detailed our reasoning for why we believe the RBNZ will leave the OCR on hold until late 2018. Indeed, that generally appears to be the consensus among NZ economists.