Key Takeaways
- • The Reserve Bank of New Zealand (RBNZ) is expected to raise the Official Cash Rate (OCR) by 25 basis points to 3.00 percent at its October 28 meeting, according to RNZ, reversing a previously signalled pause.
- • The expected move would be the third consecutive rate rise and take the OCR to its highest level in a year.
- • BNZ senior economist Doug Steel said oil prices are much higher and the New Zealand dollar is materially lower than the RBNZ assumed in its September decision.
- • RaboResearch has revised its forecast from a hold to a 25bp hike, projecting the OCR peak at 3.00 percent.
- • The decision lands just 10 days before the New Zealand general election, adding political attention to the central bank's move.
Summary
The Reserve Bank of New Zealand (RBNZ) is set to raise its benchmark Official Cash Rate (OCR) by 25 basis points to 3.00 percent, according to RNZ. The decision, due at the bank's October 28 policy meeting, would mark the third consecutive rate increase and bring the OCR to its highest level in a year. The move comes despite the RBNZ having previously signalled a pause, even as headline inflation has fallen.
BNZ senior economist Doug Steel said conditions have shifted materially since the RBNZ's September decision. "Oil prices are much higher, and the currency is materially lower than the Bank (RBNZ) assumed as it looks to get on top of stronger inflation," he said. The rise in energy costs and currency weakness are the key factors cited for reassessing the policy path.
RaboResearch had previously projected the RBNZ would hold the OCR unchanged at the October meeting. The firm has since revised its forecast to a 25bp increase, taking the OCR up to 3.00 percent, and said it now projects the peak in the OCR at that level.
The timing is notable, as the decision falls just 10 days ahead of the New Zealand general election. Forex.com has noted that the RBNZ decision is scheduled close to Australian Q3 CPI data, which could also influence expectations for the Reserve Bank of Australia.
The broader backdrop includes elevated oil prices, with Brent crude trading near $116 a barrel, amid geopolitical tensions involving Iran and disruption around the Strait of Hormuz, according to related reports in the source material.
BNZ senior economist Doug Steel said conditions have shifted materially since the RBNZ's September decision. "Oil prices are much higher, and the currency is materially lower than the Bank (RBNZ) assumed as it looks to get on top of stronger inflation," he said. The rise in energy costs and currency weakness are the key factors cited for reassessing the policy path.
RaboResearch had previously projected the RBNZ would hold the OCR unchanged at the October meeting. The firm has since revised its forecast to a 25bp increase, taking the OCR up to 3.00 percent, and said it now projects the peak in the OCR at that level.
The timing is notable, as the decision falls just 10 days ahead of the New Zealand general election. Forex.com has noted that the RBNZ decision is scheduled close to Australian Q3 CPI data, which could also influence expectations for the Reserve Bank of Australia.
The broader backdrop includes elevated oil prices, with Brent crude trading near $116 a barrel, amid geopolitical tensions involving Iran and disruption around the Strait of Hormuz, according to related reports in the source material.
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