Expectations for more aggressive RBNZ rate hikes have been reduced

Yesterday’s data released by the RBNZ:

RBNZ Q2 Inflation Expectations Survey

  • The 2-year (3.29%) wait is unlikely to cause too much additional angst for the RBNZ.

RBNZ – Cash Rate Expectations (OCR) continue to rise, 50bp increase expected this quarter

BNZ confirms:

  • Market OCR expectations were cut yesterday after the RBNZ’s 2-year inflation expectations series showed a smaller jump than apparently feared. 2-year inflation expectations rose to 3.29% in the second quarter from 3.27% previously, which is surprising given that the series is generally highly correlated to movements in headline inflation. Five-year inflation expectations rose to 2.42% from 2.30% previously, a new high for this now five-year series.
  • Market prices for peak OCR have declined over the past week from around 4.25% to around 3.85% now. The market, which not too long ago was pricing a small chance of a 75 basis point rise in the RBNZ later this month, now rates around an 85% chance of a 50 basis point rise. basic points at the May meeting.

NZD/USD is moving roughly in line with global markets at the moment:


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