RBNZ will hike to 3.25% by year-end

We expect the RBNZ to lift the Official Cash Rate by 25bp, to 3.00%, at its October meeting, as it seeks to mitigate upside risks to inflation. We’ve also brought forward our forecast for the final 25bp hike from March to December, as the Bank presses ahead with the withdrawal of monetary stimulus. However, given significant spare capacity in the economy, we still think that will mark the end of the Bank’s tightening cycle, even though markets are pricing in further hikes.