Outlook for Borrowers: Post July MPR
Stuart Ritson -
• The RBNZ increased the OCR by 25bp to 2.50% in a consensus decision, broadly in line with analyst expectations and almost fully priced by markets.
• The Bank retained a data-dependent tightening bias, signalling that further OCR increases are likely, although the timing remains uncertain.
• Market pricing for the RBNZ hiking cycle has largely converged with the Bank’s modelled OCR track from the May MPS.
• We expect a sequence of 25bp hikes at upcoming meetings. The OCR peak remains uncertain, but we think it will be above current market pricing.
• The retracement in 2- and 5-year fixed rates over the past month has created an opportunity to top up hedging, with rates likely to move gradually higher through the year.