New Zealand - Markets are overestimating the chance of rate hikes next year

While there is a consensus among economists and financial markets alike that the Reserve Bank of New Zealand will keep rates on hold at 1.75% when it meets next Thursday 23rd March, we believe that financial markets have gone too far by pricing in the chance of multiple interest rate hikes in 2018. In contrast, we expect that rates will remain on hold this year and next as concerns about low underlying inflation persist.