Market Musing, Asia Pacific

As was widely expected the RBNZ kept its Official Cash Rate at 5.5% once again at today’s meeting. After moving early and going harder than its peers the RBNZ has now held rates steady for two straight meetings. The RBNZ delivered a substantial 525bps worth of rate hikes between October 2021 and May 2023 and the negative economic effects of these moves are starting to manifest. We expect these negative trends to continue as the cashflow hit on the NZ household sector intensifies and slowdown in other interest rate sensitive sectors like housing/construction spills over into the broader economy and...

As was universally expected the Reserve Bank of New Zealand kept its Official Cash Rate at 5.5% at today’s meeting. This is the first time the RBNZ has not raised the OCR since the August 2021 meeting. The RBNZ went early and hard, delivering an eye-watering 525bps worth of rate hikes between October 2021 and May 2023. As a result, policy settings in NZ are well into ‘restrictive’ territory (i.e. above the estimated equilibrium ‘neutral’ rate). From our perspective, the underlying message from the RBNZ and developments across the NZ economy suggest that without another positive inflation shock the move...