RBNZ will hike to 5.75% in July

The latest data don’t tell a compelling story as far as the outlook for inflation and the economy are concerned. Although inflation expectations are falling, measures of underlying inflation are still far too high for the RBNZ’s liking. With strong consumer spending and resurgent net migration propping up demand, we think the Bank will err on the side of caution and deliver two more 25bp hikes. As restrictive policy settings create deflationary pressures, we still expect rate cuts to be on the table by year-end.