Economists at TD Securities expect the Reserve Bank of New Zealand (RBNZ) to hike consecutively in 50 basis points (bps) clips at its April and May meetings. The 4% terminal is expected to be reached in February 2023.

Lifting terminal OCR to 4%

“Our new forecasts have the RBNZ hiking in 50 bps clips at the July, Aug and Oct'22 meetings with 25 bps hikes in Nov'22 and Feb'23. This takes the year-end 2022 OCR to 3.75% and the final hike in Feb'23 takes the terminal rate to 4%.”

“We discuss the upside and downside risks to our 4% terminal call and it rests heavily on how the RBNZ prirotises the Growth vs inflation outlook.”

“From a market's perspective, a deterioration in market liquidity could bring an early end to the tightening cycle.”