We see few signs of a dovish pivot expected by global investors in the RBNZ statement. We now expect the Cash Rate target to peak at 4.50%. Rate hikes are clearly directed towards the bank's campaign to bring inflation back to target, and not to support the NZD. The central bank commented that the lower N.Z. dollar is likely to pose an upside risks to inflation, however, this is also helpful in re-balancing N.Z.'s current account deficit.
Expect New Zealand to fall into a recession as rate hikes feed into the economy and given elevated leverage. This will most likely lead to rate cuts around 4Q23 as inflation slows down.
Expect another 50bps hike from the RBNZ in November and two more 25bps moves in 2023.
- Nomura
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