Dawn chorus: From hawkish to heron-ish

RBNZ Assistant Governor Christian Hawkesby, who a month ago talked about a possible 50 bps hike in the OCR, says 25 bps is now more likely in a much less 'hawkish' speech

TLDR & TLDL: The outlook for interest rates just got a bit flatter because the Reserve Bank signalled yesterday it is unlikely to start hiking on October 4 with a whacking 50 basis point rise in the Official Cash Rate. It is instead more likely to hike just 25 basis points to 0.5%.

The RBNZ said it plans to take “small considered steps” as it assesses the environment. In response, financial markets quickly removed any expectations of a 50 basis point hike in the OCR in two weeks time. Photo: The Kaka/Lynn Grieveson

The broad assumption in housing markets and financial markets since the beginning of the lockdown on August 17 was that the Reserve Bank would start hiking in early October and hike again in early November because it needed to jump on inflation pressures from a height.

The idea is it couldn’t hike with its Monetary Policy Statement on August 18 because it wouldn’t ‘look good’ to do it on the first day of lockdown, and it needed to wait just in case things got out of control. …

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