RBNZ Monetary Policy Scenarios

Westpac analyzes the RBNZ's upcoming decision, contrasting the case for holding the OCR to wait for more data against hiking 25bp to combat inflation persistence triggered by the Iran war.

Key Takeaways

• 1.The RBNZ Monetary Policy Committee (MPC) is weighing two primary options for the May meeting: leaving the Official Cash Rate (OCR) unchanged or implementing a 25bp hike.
• 2.The argument for holding rates focuses on the need for tangible evidence of second-round inflation effects and the economic impact of the Iran war shock.
• 3.The case for a hike is driven by the desire to move the OCR back to a neutral zone promptly to manage persistent inflation risks and high inflation expectations.

Table of Contents

• The case to hike and the case to wait
• The case for leaving the OCR unchanged.
• The case for a 25bp increase in the OCR.

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