RBNZ Raises OCR To 5.00% - Hawkish Statement

Data Flash (New Zealand)

OCR increaesed to by 25 bps to 5.0%.

Further rates hikes foreshadowed for this year to 6.25% in November. RBNZ appears to still have upside bias, based on strong domestic demand and global recovery. Significant concern about pace of migration in particular. Inflation projected to stay above 1.5% mid-point of target range over next 3 years.

While we do not disagree with the medium-term OCR profile projected by the RBNZ, the early move today has come as a surprise. There is the risk of a negative reaction by international investors, particularly given the Fed statement this morning that reflected no more than a neutral bias. The RBNZ's stance may be interpreted as unnecessarily aggressive.

Further 25 bps tightening steps should be expected for the 17 April and 15 May RBNZ reviews.

Ulf Schoefisch, Chief Economist

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