PREVIOUS TRADING DAY EVENTS 16 August 2023

On Wednesday, the Official Cash Rate OCR was held steady at 5.5 by the Reserve Bank of New Zealand RBNZ. The OCR needs to stay at restrictive levels, they said.

The committee agreed that the OCR official cash rate needs to stay at restrictive levels for the foreseeable future to ensure annual consumer price inflation returns to the 1 to 3 target range, the bank said in its policy statement. 

The New Zealand economy is evolving broadly as anticipated but the cash rate would need to remain at around its current level of 5.5 to meet its inflation and employment objectives. The RBNZ has a 40 chance of a further 25 basis point hike to 5.75 in 2024, according to the monetary policy review MPR. The rate hikes have sharply slowed the economy now in a technical recession following two quarters of negative growth.

Its track now indicates that it does not expect to cut until the first half of 2025, much later than expected by economists, who had forecast cuts to begin in the second quarter of next year.

New Zealands annual inflation is currently 6.0, with expectations it will return to the central banks 1 to 3 target by the second half of 2024.

Paul Bloxham, chief economist for HSBC in Australia and New Zealand, said Economic activity has clearly slowed, even if it does have a bit more momentum than expected, and the economy is disinflating. In addition, the full impact of the monetary tightening already delivered is still to…