RBNZ unlikely to resort to big rate hikes on recession risk – Kiwibank

The Reserve Bank of New Zealand (RBNZ) is unlikely to deliver big interest rate hikes, as it could risk putting the economy into a recession while combating higher inflation, Kiwibank Chief Economist Jarrod Kerr said in the latest client note.

Key quotes (via Bloomberg)

“Given a more subdued growth outlook, we expect the RBNZ to keep to the speed limit of 25 basis points per hike.”

“If the RBNZ accelerates its tightening it risks crashing the economy into a recession.”

“Economic growth will slow to 3% this year from 5.6% last year as the country battles its omicron outbreak. The probability of a recession has risen as the housing market slows.”

“Interest rates have already started to bite.”