Credit Agricole CIB Research discusses its expectations for this week's RBNZ policy meeting.
"We expect the RBNZ to join the Norges Bank and become one of the first G10 central banks to raise rates by 25bp on Wednesday. While lockdowns have dented the economy’s recovery, the central bank is facing above target headline inflation and underlying inflation above the mid-point of its 1-3% target band," CACIB notes.
"So, we expect the RBNZ to proceed cautiously with its rate hikes and to raise its OCR by 25bp to 0.50% tomorrow. Indeed, we see risk that the NZD sells off post the RBNZ meeting as the central bank will express this caution in its rhetoric in the face of aggressive market pricing for 100bp worth of rate hikes by mid-2022," CACIB adds.