RBNZ piloting a plane without knowing how hot the engine is running

Westpac Bank expects it to remain at 5.5%, with most interest centering on the profile for interest rates this year and beyond. However there is a 25% probability of a hike, Kelly Eckhold, Westpac’s chief economist says.

“We think the RBNZ’s objective will be to try to maintain the recent repricing in financial markets which has removed the expectation of rate cuts until at least the end of this year.”

He says the option to tighten at the May monetary policy statement will probably be left open by the RBNZ should the data warrant it.

“The RBNZ will be on edge due to some aspects of the recent data flow – even though a straight read of the entirety of that data probably shouldn’t increase concerns inflation will move back inside the 1-3% target range.”