Despite the rise in virus cases in recent weeks, strong inflation in New Zealand increases the pressure on the RBNZ to tighten policy further. While we are sticking to our forecast of a 25bp hike in November, there is certainly a risk that the Bank decides to hike rates by 50bps. Meanwhile, in Australia, the RBA defended its yield target this week as markets continue to challenge the RBA’s view that rates will be on hold until 2024. We’re less hawkish than financial markets but we do think wage growth will pick up faster than the RBA expects. Indeed, we expect the Bank to start hiking rates in early 2023.
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