BENGALURU, Aug 12 (Reuters) - The Reserve Bank of New
Zealand (RBNZ) will stick to its hawkish stance and deliver a
fourth straight half-point rate hike on Wednesday in its most
aggressive tightening in over two decades to try to rein in
stubbornly-high inflation, a Reuters poll found.
One of the first to withdraw pandemic-era stimulus among its
peers, the RBNZ's rate-hiking campaign to curb the highest
inflation in three decades, at 7.3%, has already pushed rates up
by 225 basis points since October.
With inflation not expected to ease anytime soon and the
labour market remaining tight, the RBNZ is likely to stay
focused on containing price pressures while trying not to tip
the economy into a recession.
All 23 economists in the Aug. 8-11 Reuters poll forecast
rate setters at the RBNZ would hike its official cash rate by
another 50 basis points at its Aug. 17 meeting, taking it to
3.00%. It was 1.00% before the COVID-19 pandemic.
"We think the data has been more unfriendly on the inflation
front than they expected, but not enough to tip them over into a
panic. Rates have been rising here for a year, so they are well
into this cycle, and they have delivered quite a lot," said
Sharon Zollner, chief economist at ANZ.
"I cannot rule out they would go 75 if they really decided
they needed to give the market a kick in the pants. At this
point, we would not view it as particularly likely."
All but one of the 23 economists polled also forecast rates
to reach 3.50% or higher by the end of 2022 in what would be the
most aggressive policy tightening since the official cash rate
was introduced in 1999.
While the RBNZ has signaled plans to increase the rate to
4.00% by mid-2023, almost matching the U.S. Federal Reserve, few
economists in the poll said it would go that far.
Only five of 23 economists predicted rates would reach 4.00%
by end-2022, up from one in the previous poll.
A slowing economy, along with the first annual fall in
property prices in more than a decade, is likely to restrict the
central bank from delivering bigger rate hikes.
A majority of economists who answered an additional question
predicted the central bank would revert to more standard 25
basis point increments at its October and November meetings.
"Towards the end of 2022, we expect to see economic and
pricing pressures moderating, allowing for interest rate hikes
to cease," said Brad Olsen, principal economist at Infometrics.
"Despite this, we are firm in our view that the Reserve Bank
will, and should, continue to increase interest rates until
inflation is controlled, no matter how the economic environment
Twelve of 19 respondents forecast the cash rate to either
stay steady at 3.50% or be lower by end-2023. The remaining
seven predicted it would climb to 3.75% or higher by then.
Inflation was expected to fall within the target range of
2%-3% in the second half of next year, a separate Reuters poll
(Reporting and polling by Devayani Sathyan; Editing by Hari
Kishan, Ross Finley and Mark Potter)