TD Securities’ Prashant Newnaha shifts the Reserve Bank of New Zealand (RBNZ) call to start 25 bps hikes in July rather than September, keeping a total of four moves in the profile. Newnaha highlights RBNZ guidance that the OCR is likely to rise at coming meetings, while stressing a weak growth outlook and a more deeply negative output gap. He prefers receiving New Zealand rates on yield sell-offs, viewing the neutral rate near 3.50% as a ceiling.

RBNZ path pulled forward to July

"We retain 4 x 25bps RBNZ hikes in our cash rate profile, but forecast the hike cycle to commence from July and not September as per our prior forecast."

"None of these conditions were broken supporting a hike ahead of the May meeting and the RBNZ would not have had data to categorically show a breach of these conditions by the July meeting to hike then either."

"Nonetheless, the RBNZ yesterday declared acting preemptively to be the more prudent option."

"The Bank's OCR track is consistent with the first 25bps hike in Jul."

"The Bank's estimate of the nominal neutral rate is 3.50% and this should serve as a ceiling on pricing."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)