The RBNZ left the Official Cash Rate (OCR) unchanged at its January review as we expected. However, in our view, the Bank gave the clearest possible indications that it anticipates raising rates in March. It said “there is a need to return interest rates to more-normal levels. The Bank expects to start this adjustment soon”. In our view, “soon”, is as close as it gets to code for “the next meeting”. In addition, the reference to “more normal” levels is a reminder that the OCR is currently at an abnormally low level. The RBNZ’s own analysis shows the ‘neutral’ cash rate as being around 4.25%. We concur with this view.
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BNZ