In its latest report, New Zealand’s Treasury Department predicted that the economy will narrowly avert a recession next year, in the face of rising rates and slowing demand.

Key quotes (via Bloomberg)

“Treasury projects inflation will slow from 6.9% today to 5.2% by June 2023. It doesn’t see it returning to the RBNZ’s 1-3% target range until early 2025.”

“As usual, the Treasury included an alternative scenario in the budget. “

“The downside slant -- which assumes more persistent inflation and a sharper rise in interest rates -- makes for grim reading, projecting five straight quarters of GDP declines starting in early 2023 as well as a surge in unemployment.” 

RBNZ policymakers meet next week, with another half-percentage-point hike in the official cash rate (OCR) on the cards.

Market reaction

Amid recession warnings, NZD/USD is trading 0.16% lower on the day at 0.6367, as of writing. The US dollar has regained its lost ground vs. its major peers.