RBNZ - Reserve Bank of New Zealand

11-AUG-2023

RBNZ ANNOUNCEMENT (WED): The RBNZ is likely to keep rates unchanged at next week's meeting with money markets pricing a 99% probability that the Official Cash Rate will be maintained at the current level of 5.50%. As a reminder, the RBNZ left the OCR unchanged at the prior meeting to snap a streak of 12 consecutive rate hikes which was widely expected given that the central bank had previously signaled that the hiking cycle was over, while the Committee agreed that the OCR will need to remain at a restrictive level for the foreseeable future and noted the level of interest rates is constraining spending and inflation pressure as anticipated and required. Furthermore, the RBNZ acknowledged inflation remains too high but is expected to decline within the target range by H2 2024. The rhetoric from the central bank has been very light since that meeting which only took place over 4 weeks ago, therefore, there hasn't been much to deviate from the current view of no more rate hikes and that the OCR will need to remain at a restrictive level for the foreseeable future. In addition, the data releases have been mixed and support the case for a pause with CPI firmer-than-expected for Q2 at 1.1% vs. Exp. 1.0% (Prev. 1.2%) and YY at 6.0% vs. Exp. 5.9% (Prev. 6.7%) but has slowed from the prior and labour cost index was also softer than estimated, while jobs growth topped forecasts at 1.0% vs. Exp. 0.5% (Prev. 0.8%) but the Unemployment Rate also rose to 3.6% vs. Exp. 3.5% (Prev. 3.4%).