RBNZ preview: Westpac see July 8 rate hold. Tightening cycle still in effect, pared back
A lower projected OCR peak and a softer tightening path than Westpac had pencilled in only a few months ago is a moderately dovish revision for rates markets, even as the bank still expects two further hikes between September and December. The call for a low-drama, possibly unanimous hold at the 8 July meeting removes near-term event risk, shifting attention to the September MPS as the next live decision point. Westpac's continued downside view on the kiwi, driven by widening rate differentials against the US and Australia, is the more actionable signal here for FX desks, and sits somewhat at odds with the bank's more constructive growth and inflation revisions. Two-sided risks around the timing of the recovery and the pace of underlying disinflation mean this path is far from locked in.
--- Westpac says the early end to the Iran war points to softer inflation and faster recovery, trimming its RBNZ OCR peak forecast to 4% by end-2027.
Reserve Bank of New Zealand announcement due Wednesday, July 8 2026
- 2pm New Zealand time
- 0200 GMT
- 2200 US Eastern time (on Tuesday July 7)
Summary:
- Westpac said the early resolution of the Iran war points to a weaker inflation outlook and an earlier economic recovery for New Zealand, according to a research note from the bank
- The bank expects the RBNZ to begin raising the OCR in September, but with only one further hike in 2026, down from two previously expected
- Westpac sees the OCR peaking at 4% at the end of 2027 before easing back to a neutral 3.75% by the end of 2028
- The bank now expects headline inflation to peak at 4.0% in the June quarter before ending 2026 at 3.5%, with risk skewed lower if recent oil price falls hold
- Westpac lifted its 2026 GDP growth forecast to 2.0% from 1.5%, though this remains below its pre-war projection
- The bank expects the RBNZ to hold the OCR at 2.25% at its 8 July meeting, in a decision it expects to be far less contentious than May's and possibly reached by consensus
- Westpac flagged continued downside risk for the New Zealand dollar given wider interest rate differentials against the US and Australia
Westpac says the swifter than expected resolution of the Iran war has reshaped its outlook for New Zealand's economy, pointing to softer inflation and an earlier recovery than the bank had been forecasting just months ago. In a research note, the bank's economists said the RBNZ's own rate path has likely shifted back toward the trajectory it set out in its February Monetary Policy Statement, before the conflict pushed oil and broader commodity prices sharply higher.
Westpac has revised its own forecasts to reflect what it described as the unexpectedly quick end to the conflict and the associated sharp decline in oil, refined fuel and related commodity prices. The bank now expects headline inflation to peak at 4.0% in the June quarter before easing to 3.5% by the end of 2026, and said that figure could come in lower still if the recent drop in oil prices proves durable. Alongside the softer inflation view, Westpac lifted its 2026 GDP growth forecast to 2.0% from 1.5% previously, though it noted this remains below the growth path it had pencilled in before the war began.
On policy, Westpac expects the RBNZ to hold the OCR at 2.25% at its 8 July meeting, and said it expects that decision to draw far less debate than the central bank's May meeting, raising the possibility it could even be reached by consensus rather than a split vote. The bank reaffirmed its view that the RBNZ will start tightening at the September MPS, but now expects only one further hike before year-end, at the December meeting, rather than the two additional moves it had previously forecast.
Relative to both Westpac's and the RBNZ's pre-conflict projections, that still implies one extra OCR increase across 2026, which the bank attributed to an inflation path that remains more elevated than was expected before the war. Westpac has nonetheless lowered its forecast peak for the OCR to 4%, consistent with what it now views as a smaller and shorter-lived oil-related supply shock, while keeping the same broad pattern of moves through 2027.
The bank cautioned that risks around this profile run in both directions, hinging on how quickly the economy recovers through the second half of 2026 and how fast underlying inflation pressures fade. Westpac also flagged persistent downside risk for the New Zealand dollar, noting that interest rate differentials are likely to weigh on the currency given materially higher policy rates in the United States and Australia.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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