RBNZ's surprise hike splits economists on pace of tightening ahead
The Reserve Bank's decision to lift the official cash rate to 2.5% last week caught much of the market off guard, and bank economists remain split on what comes next.
ASB had expected the RBNZ to hold, given an inflation outlook that "appears more comfortable than it did back when the RBNZ last met," according to the bank's chief economist Nick Tuffley. Instead, the Monetary Policy Committee reached a unanimous decision to hike, a marked shift from May's tied 3-3 vote.
Westpac senior economist Michael Gordon was similarly surprised by the reasoning behind the move, noting the RBNZ pressed ahead "without waiting to see the June quarter inflation data," the period most affected by the oil price shock.
Kiwibank went further, questioning not just the timing but the distributional impact, arguing that "households most affected by the hike are the ones doing it toughest," pointing to an uneven recovery where the pain from tighter policy is falling hardest on parts of the economy still struggling to regain momentum.
Where forecasts diverge from here
All three banks agree the OCR is heading higher, but the pace and peak vary meaningfully.
ASB expects a steady sequence of 25 basis point hikes from September to a "Goldilocks" neutral level of around 3.25% by year-end, though Tuffley flagged "a reasonable chance that the RBNZ will pause along the way."
Westpac has brought forward its own profile, now expecting two more hikes this year at the September and December reviews, followed by a peak OCR of 4% reached at the September 2027 Monetary Policy Statement, three months earlier than previously forecast.
Kiwibank, meanwhile, argued the domestic demand needed to justify tighter policy "is just not there yet."
Data due this week, including the NZIER's Quarterly Survey of Business Opinion and the RBNZ chief economist's speech on inflation pass-through, should offer brokers an early read on whether the tightening cycle broadens or stalls.
For more insights, read the ASB, Kiwibank, and Westpac reports.
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