Goldman Sachs note following the higher than expected inflation data from New Zealand earlier on Monday.

The data is here ICYMI:

• New Zealand Q2 CPI 1.7% q/q (expected 1.5%)

Goldman Sachs:

Goldman Sachs assess that the upside surprise to CPI „relative to the RBNZ’s already-elevated forecasts clearly raises the risk that the RBNZ steps up the pace of tightening at its August meeting (we see a 35% chance of a 75bp hike).

But, GS goes no,

• “However, we note that in its meeting last week the RBNZ had already flagged the 'near-term upside risk’ to inflation, but this was balanced against the ’emerging medium-term downside risks to economic activity’ in driving its decision for a 50bp hike.
• With the OCR already at a modestly restrictive level of 2.50%, we think the bar for the RBNZ to accelerate the pace of tightening at this point in the cycle is relatively high – and will likely require clearer signs of a breakout in long-term inflation expectations rather than high spot inflation.
• We maintain our call for a 50bp hike in August and 3.50% OCR by year-end, and will be watching closely at the upcoming data on Q2 labor force and inflation expectations ahead of the August RBNZ meeting.