Reply To: Reserve Bank of New Zealand Raise Rates by 75bp to 4.25% to Highest Since January 2009


Kiwibank update on New Zealand “The RBNZ will induce a recession”

The main points:

The outlook for the Kiwi economy is deteriorating into a recession. Large parts of the global economy will fall into recession, as central banks hike interest rates to squash inflation. The RBNZ is even more extreme.

The RBNZ are hell-bent on forcing inflation back within its mandated 1-to-3%yoy target band. And fair enough, their credibility as an inflation-fighter is being tested. They expect the OCR to hit 5.5% in order to achieve the required economic slowdown.

We think a move beyond 5% is a step too far. What the RBNZ will do (hike to 5.5%), is beyond what we think the RBNZ should do. We place a much larger weight on the global slowdown, higher interest rates are effective, and Kiwi are feeling the pinch now.

Analysts forecasts for NZD/USD:

Dec 22: 0.65

Jun 23 0.57

Dec 23 0.55

Jun 24 0.59

Dec 24 0.63

Jun 25 0.67

Dec 25 0.69