While the Reserve Bank of New Zealand will almost certainly keep the official cash rate on hold at 1.75% at its policy meeting on Thursday 11th May, in light of the stronger-than-anticipated first-quarter inflation figures the RBNZ may adjust its OCR forecasts in the accompanying Monetary Policy Statement. Rate hikes are now likely to occur before the RBNZ’s previous forecast of the second half of 2019, but we believe the financial markets have gone too far by pricing in rate hikes for this year and next year.
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