RBNZ begins rate hikes

	The Reserve Bank of New Zealand increased the OCR by 25 basis points to 2.75%, as widely anticipated.  Accompanying the move, the RBNZ delivered a reasonably neutral statement.
	The RBNZ’s inflation outlook remains our key concern, as it is quite low compared to our own and Treasury’s.  Further to this, the RBNZ has made some optimistic assumptions around price and wage setting behaviour remaining unaffected by the Government policy-induced inflation spike.
	With the domestic recovery on track and the inflation outlook uncomfortably high, we expect the RBNZ will continue to hike the OCR steadily in 25 basis point moves at each meeting.

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Other sites of interest: www.asbsecurities.co.nz  www.asb.co.nz  www.commbank.com.au

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Report prepared by:
Jane Turner
ASB Economist
Phone: +64 9 374 8185
Fax: +64 9 302 0992