With markets already pricing a 94% chance of a hike, the September decision itself carries limited surprise potential, shifting focus to how the RBNZ frames the path beyond it.
BNZ’s own inflation forecast of 3.7% for the September quarter, well above the RBNZ’s own July projection of 3.3%, points to a growing gap that could force more aggressive guidance than markets currently expect
The key pricing question is whether October and December both carry live hike risk, with futures currently reflecting only one further move across those two meetings. BNZ says a hike at the September 2 meeting is essentially locked in, but believes the RBNZ will ultimately need to tighten further and faster than its own guidance currently suggests. Summary: BNZ expects the RBNZ to raise the cash rate 25bp to 2.75% at the upcoming September MPS, calling it a near certainty given 94% market pricing.
The RBNZ is expected to signal further tightening toward a peak of around 3.5%, though BNZ’s own house view has the cash rate reaching 4.0% by May 2027. BNZ forecasts September quarter annual CPI at 3.7%, above the RBNZ’s own July assessment of 3.3%, with growth also tracking at least as strong as expected. Downside risks include a possible El Nino driven recession, election related delays, and a global asset price correction; upside risks centre on structural inflation and weaker output growth.