The Reserve Bank of New Zealand (RBNZ) hiked the Official Cash Rate (OCR) by 50 bps to 3.50%. Today's Statement makes clear the RBNZ job is far from done. Thus, economists at TD Securities expect the terminal rate to hit 4.50% in April 2023.

Still some heavy lifting to do

“The RBNZ hiked the OCR by 50 bps as expected to 3.50%. The Bank reiterated continuing to hike ‘at pace’ given the demand for goods continues to exceed supply, core inflation is too high and the labour market is very tight.”

“Although the Bank considered hiking 75 bps today, we still expect a 50 bps hike next month.”

“The RBNZ Governor's comments that the hike cycle is very mature and the possibility the Board pays more attention to offshore risks opens a downshift to 25 bps hikes in Feb and Apr'23 taking terminal to 4.50%. Unless there is a destabilising risk event, the risks to our OCR forecast are to the upside.”