RBNZ - Reserve Bank of New Zealand

RBNZ - Reserve Bank of New Zealand

6-OCT-2023


RBNZ -The RBNZ left rates at 5.5% at its October meeting where it has been since the last hike in May, and it reiterated its high-for-longer stance but didn't imply that there may be more tightening in the pipeline. The continued pause was widely forecast but some expected a more hawkish statement but given the upcoming election it is unsurprising that the MPC didn't want to change its message. The NZ outlook "remained similar" to the last meeting implying that as of this month the RBNZ's forecasts are unchanged. The statement suggests that while there may some near-term changes to the bank's expectations, its focus, the medium-term, is unaltered. The decision was unanimous. There was a tweak to the end of the statement saying that policy needs to remain restrictive for "a more sustained period of time" rather than "the foreseeable future". This may be implying that rather than increase rates further, policy may stay tight for longer than is currently projected. Thus, a rate hike in November seems unlikely, but will depend on upcoming CPI on Oct 17 and labour market data on November1, but the first rate cut may be pushed out further into 2025 in the updated projections with the OCR path from 2025 higher.Governor Orr made clear that
the 10bp upward revision in August to 2024 OCR expectations was a result of modelling and was not a signal
. He also said he was not in a "rush" to change rates in either direction. Some analysts are forecasting a 25bp rate hike in November, but it seems more likely that policy will stay restrictive for longer. While the MPC noted some near-term risks to the expected easing in demand and inflation, its outlook hasn't changed and thus there's no need to change policy for now. Key data will be released before the next meeting, including Q3 CPI & inflation expectations and employment/wages. The November 29 meeting will also include revised forecasts which are likely to show stronger near-term growth and may signal a delay to the first rate cut. There will also be a press conference following the decision, which should be helpful for gauging if the RBNZ is
more prone to waiting rather than worrying.