With inflation falling and employment steady, the RBNZ will be wishing for no-thrills budget

The path of future monetary policy will be partly decided by whether Chris Hipkins’ makes good on his promise to deliver a no-frills Budget that doesn’t exacerbate inflation. The Reserve Bank of New Zealand (RBNZ) will likely end its rate hike crusade this month with one final increase to the Official Cash Rate in its May Monetary Policy Statement. Labour market data released on Wednesday showed the unemployment rate holding on at 3.4% and private sector hourly wage growth up to 8.2% from 8.1%. More relevant to the Monetary Policy Statement in May will be the actual spending levels contained in Budget 2023. The path of monetary policy will be (ever-so-slightly) softened if Hipkins’ sticks to his word and the government can resist an election-year, lolly-scramble budget.