The Reserve Bank is universally expected to lift the official cash rate by at least 25 basis points – to 1 per cent – today at 2pm.
But there’s an outside chance of a double, 50-basis-point, hike.
While the odds on a double-hike are long, some economists say it remains a realistic possibility as the central bank looks to get ahead of rapidly rising consumer price inflation.
BNZ head of research Stephen Toplis said earlier his central view was still for a 25bp hike, but a 50bp hike was still “a genuine option” given the Reserve Bank’s track record of taking a “least-regrets” approach.
“In our opinion, at this meeting, the Reserve Bank will be torn between a strict least-regrets view of the world and the growing uncertainty that pervades,” Toplis said.
“Least regrets would mean not risking the chance that inflation might become more entrenched – driven, in particular, by a classic wage-price spiral.”
ANZ chief economist Sharon Zollner also said she would not rule out a 50bp hike.
“It’s been a long time between drinks for the RBNZ, with no opportunity to move the official cash rate [OCR] since late November,” she said.
“If there hadn’t been a hole in their meeting calendar in January, we’d certainly have another hike under the belt by now. So should the RBNZ make up for lost time?”
But ultimately both Zollner and Toplis see the risks of an economic slowdown as the Omicron wave passes through New Zealand as a reason the RBNZ will likely play it safe this time.
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