The Reserve Bank of New Zealand is now expected to lift the Official Cash Rate by 25 basis points to 3% at its October meeting, reversing an earlier call for a pause. The projected tightening path still includes further 25bp increases in December and February, which would take the terminal rate to 3.50% from 3.25%. The shift follows recent moves in key inflation inputs, alongside discussion of the Bank’s scope to deliver an October hike even though its September OCR track did not make that step the central case.
Dubai Crude Price Trends
Dubai crude has climbed since the end of September, rising 9% in US dollar terms from end-Q3 to 15 October, and then adding another 5.5% over the subsequent week and a half. It is tracking above the Bank’s Q4 average oil price assumption of around US$84.
Impact of Exchange Rate Movements
Meanwhile, the New Zealand trade-weighted index is currently 3.6% below the Bank’s Q4 forecast, and a weaker NZD is framed as supportive for growth while adding upside inflation risk.
