Bank of America Global Research discusses its expectations for next week's RBNZ August policy meeting.

"We expect the Reserve Bank of New Zealand (RBNZ) to deliver another 50bp hike to lift the OCR to 3% at the August meeting.While policy guidance should remain hawkish in light of price pressures, there is risk the Bank may introduce more conditionality on the scale of subsequent policy front-loading. The quarterly Monetary Policy Statement should reflect both modest changes to the OCR track, and unveil softer growth and labour market forecasts. But signs of an inflation peak are not yet in sight,"BofA notes.

"An RBNZ pivot is closer in view compared with an RBA shift. NZD 2s-10s swap curve inversion will begin to stall and we look for AUD rates to play curve flattening catchup. However, another hawkish RBNZ evolution would pave the way for more pronounced steepening of forward starting NZD swap curves. We also expect both NZD Bank bills and 10yr NZD government bonds (NZGBs) to begin cheapening relative to OIS rates," BofA adds.

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