The NZIER Shadow Board result points to a hike as the more likely outcome on Wednesday, but the split within the panel, with several members preferring to hold at 2.50 percent, tempers how confidently markets should price it in. A 25 basis point increase to 2.75 percent would extend the tightening cycle the RBNZ resumed in July and align with the median view already circulating among bank economists ahead of the meeting. Given that most forecasters already expect this outcome, the more market-sensitive elements are likely to be the accompanying OCR track and any signal on October, where the panel and outside economists broadly expect a data-dependent, rather than pre-committed, stance. A hike delivered with cautious forward guidance would likely be read as only mildly hawkish for the New Zealand dollar, whereas a hold, or a hike paired with an unexpectedly firm tightening signal, would produce a larger repricing given how closely the outcome tracks consensus.
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Earlier:
- Preview: Inflation and growth strength point to further RBNZ tightening, BNZ says
- 90% of economists expect RBNZ hike on September 2, poll shows
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A split but hike-leaning Shadow Board sets the stage for what most economists already expect to be a consensus 25 basis point rise on Wednesday.
Summary:
- NZIER’s Monetary Policy Shadow Board says just over half its members recommend a 25 basis point OCR hike to 2.75 percent at the RBNZ’s Monetary Policy Statement on September 2.
- Other members favour holding the OCR at 2.50 percent, citing subdued domestic activity and a recent easing in inflation expectations from the RBNZ’s Survey of Expectations.
- Those backing a hike point to inflation remaining high and the need to keep returning the OCR toward neutral.
- Looking a year ahead, Shadow Board members broadly agree the OCR should keep rising, with views centred on 3 to 3.25 percent.
- Several members stressed a preference for gradual increases that balance controlling inflation against supporting a still-fragile economy.
- The Shadow Board operates independently of the RBNZ; its next release is scheduled for October 27, ahead of the RBNZ’s Monetary Policy Review.
New Zealand’s central bank looks set to raise the Official Cash Rate again this week, with NZIER’s Monetary Policy Shadow Board reporting that just over half its members recommend a 25 basis point increase to 2.75 percent at the Reserve Bank of New Zealand’s Monetary Policy Statement on September 2. The independent panel’s split verdict, released Monday, nonetheless leaves a meaningful minority favouring a hold at the current 2.50 percent.
Those backing further tightening argue the OCR remains well below neutral even as core inflation sits at the top of the RBNZ’s target band, leaving less room to justify continued stimulus. Others on the panel pointed to a more cautious picture, noting that domestic economic activity remains subdued and that inflation expectations in the RBNZ’s own Survey of Expectations have eased recently, arguing those conditions favour holding rates steady for now rather than adding further pressure to a fragile recovery.
The RBNZ has already resumed tightening this cycle, lifting the OCR to 2.50 percent in July as it works to bring inflation, which peaked at 3.9 percent in the June quarter, back toward its 1 to 3 percent target range. That decision came even as falling global oil prices, aided by some easing in Middle East tensions at the time, reduced the near-term inflation forecast relative to the RBNZ’s earlier projections.
Looking further out, Shadow Board members were broadly aligned that the OCR should keep climbing over the coming year, with individual views clustering between 3 and 3.25 percent, consistent with external bank forecasts that see the RBNZ signalling a similar tightening path while remaining deliberately non-committal about the pace of further moves, including whether an additional increase follows at October’s Monetary Policy Review.
The NZIER Shadow Board operates independently of the RBNZ, with each participant assigning a probability weighting to potential policy actions that are then averaged into a single panel view. Its next release is scheduled for October 27, ahead of the RBNZ’s subsequent Monetary Policy Review.
This article was written by Eamonn Sheridan at investinglive.com.