January 28 OCR Preview: RBNZ on hold at 2.50%
The RBNZ will reiterate that they expect the tightening cycle to begin around the middle of this year.
The timing of hikes is less significant than the extent of the tightening cycle. The economy has clearly moved into a recovery phase and short-term interest rates are a long way from normal.
Maybe it's just the usual listlessness around the Christmas/ New Year period, but there doesn't seem to be a great deal of anticipation around next Thursday's OCR review. Since the December Monetary Policy Statement the economic picture has generally panned out as the RBNZ expected, with no 'blockbuster' data that might warrant a change in view.
That suggests we should expect a fairly innocuous statement next week, with similar language to that used in December. But don't take that as a sign of complacency: the start of the OCR tightening cycle is drawing closer, and the RBNZ have already made it clear that once they have the confidence to begin, they will be doing a lot of work over the next couple of years to return policy to more normal settings.
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