The New Zealand economy is clearly overheating and the Bank’s mandates for both inflation and the labour market are now fulfilled. We therefore expect the RBNZ to hike the OCR by 50bps at its upcoming meeting on Wednesday 18th August. And with the unemployment rate likely to fall further, and inflation set to remain above the mid-point of the Bank’s target we think the Bank will hike rates to 1.50% by the middle of next year.
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