Reserve Bank of New Zealand: Another Rate Hike in Sight?

Investors and traders are focused on the Reserve Bank of New Zealand (RBNZ) interest rate decision due on Wednesday. Market analysts expect the release of the Federal Open Market Committee (FOMC) minutes to see if the Federal Reserve (Fed) plans to proceed with further monetary policy tightening.

Uncertainty about RBNZ’s interest rate decision

Market analysts have already focused on the upcoming RBNZ governing board meeting. The board is expected to announce its decision on interest rates and monetary policy. Although economists suggest that the RBNZ will likely raise borrowing costs, they are uncertain about how much, with some anticipating a 25 basis points hike and others a 50 basis points rise.

New Zealand’s Finance Minister Grant Robertson noted that “the RBNZ has a responsibility to address inflation. The RBNZ needs to look through current events.” 

ANZ analysts said in their report: “this week is all about the RBNZ and the debate regarding whether cyclone Gabrielle will or should change their OCR decision (analysts’ consensus and market pricing still say a 50 bps hike). NZD will be hypersensitive to the RBNZ’s decision and tone.”

Bank of Canada to publish inflation figures

The Bank of Canada (BoC) will publish its January inflation report. Economists expect core CPI inflation to come in at 5.5% on an annualised basis. On January 25th, Canada’s central bank hiked its key interest rate to 4.5%, the highest level recorded since 2008.

According to a Reuters report, the BoC’s board is under pressure as a Senate committee has asked for more transparency related to the central bank’s decisions. The Conservative party has accused the BoC’s board of misjudging inflation.

Commenting on inflation, the BoC’s Deputy Governor Paul Beaudry noted that “the BoC is committed to bringing inflation back to target and will do so even if its policy-setting path diverges from central banks in other countries. We know that it will take time to get back to the Bank's inflation target. Even if inflation has declined lately, we can't take our eyes off it too soon and let it remain significantly above target for too long.”

Canadian retail sales report due on Wednesday

Statistics Canada will publish its December retail sales report on February 23rd. Economists forecast a 0.2% rise on a month-to-month basis. Retail sales had decreased by 0.1% in November, on a monthly basis. Market analysts suggest that a potential retail sales increase could force the BoC to reassess its monetary policy as increased consumer spending could boost inflation.

Goldman Sachs: Chinese stocks could surge by 24% by the end of 2023 

The Chinese stock market seems to be getting the Goldman Sachs (GS) analysts’ vote of confidence when it comes to anticipated growth. A GS report released on February 20th said there could be a potential 24% upside to the MSCI China index.

More specifically, the report noted that “we believe the principal theme in the stock market will gradually shift from reopening to recovery, with the driver of the potential gains likely rotating from multiple expansion to earnings growth/delivery.” At the end of January, the MSCI China index hit a 4-month high, gaining almost 60% since the beginning of October 2022.

Economists at GS suggest that the Chinese GDP will likely grow by 5.5% in 2023, drawing strength from excess savings of $437 billion and increased consumer spending.

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