RBNZ to delay tightening until next year

A fresh lockdown upended the Reserve Bank of New Zealand’s plan to raise interest rates this week. Given that the latest virus outbreak is driven by the highly contagious Delta variant, we suspect that new cases won’t fall back to zero quickly, forcing at least some restrictions to remain in place until a much larger share than the current 19% of the population are fully vaccinated. As such, we’ve pushed back our forecast for the first RBNZ rate hike to May next year. By contrast, we suspect that the resilience of Australia’s labour market will convince the Reserve Bank of Australia to press ahead with the tapering of its bond purchases next month.