The Reserve Bank of New Zealand (RBNZ) increased its Official Cash Rate (OCR) by 50 bps for a third straight meeting to 2.5%. Moves across rates and FX were muted to the expected outcome. Economists at TD Securities expect the RBNZ to hike the OCR by 50bps again at next month's meeting

RBNZ sticks to the script

“The RBNZ did not surprise the market and delivered a third consecutive 50 bps hike, which brought the OCR to 2.5%. The OIS strip was priced for this outcome and all market analysts anticipated this hike.”

“The RBNZ retains its May MPS OCR guidance for the OCR to be ~3.5% by November and a 4% terminal rate in 2023.”

“The Bank acknowledges the medium-term downside risks to economic activity but near-term upside risks to inflation dominate current RBNZ's thinking.”

“We expect the RBNZ to hike the OCR by 50 bps again at next month's meeting. However, the absence of a mention of the 'least regret' approach may suggest the Bank is subtly preparing the market for a 'step down' in the pace of rate hikes.”