Reserve Bank of New Zealand Raise Rates by 50bp to 4.75% to Highest Since January 2009

The Reserve Bank of New Zealand aggressive hiking cycle continues. It raised its Official Cash Rate by another 50 bps to 4.75%, as expected. Back in November, the RBNZ hiked by 75bps to 4.25% and said it had considered a 100bps hike as an alternative and indicated that further tightening was required. The RBNZ was the first central bank in a developed money market to raise its cash rate above the neutral level. The bank’s committee members agreed monetary conditions needed to continue to tighten until inflation back in target range. The RBNZ saw the terminal official cash rate at 5.5% in June 2024.


The Reserve Bank of New Zealand raised the cash rate to 4.75% from 4.25%.

New Zealand’s central bank delivered its tenth straight interest rate hike on Wednesday. The rises in the official cash rate which began last year were the first since 2014 when the OCR hit a post-GFC peak of 3.5 per cent.

Statement Highlights

  • Committee members agreed that monetary conditions needed to continue to tighten further.
  • While there are early signs of price pressure easing, core consumer price inflation remains too high
  • Employment is still beyond its maximum sustainable level, and near-term inflation expectations remain elevated.
  • Committee will look through short-term output variations and direct price effects of cyclone damage
  • While there are early signs of demand easing it continues to outpace supply, as reflected in strong domestic inflation
Reserve Bank of New Zealand Interest Rate

Wednesday’s move was the 10th straight rise, bringing a total of 450bps hikes since October 2021, the most aggressive tightening since 1999. 

From the Minutes:

  • Increases of 50 and 75 basis points were considered.
  • Inflation is currently too high and employment is beyond its maximum sustainable level
  • Committee agreed it must continue to increase the official cash rate (ocr) to return inflation to target and to fulfil its remit
  • Balance of risks around inflation remain skewed to the upside
  • The extent of this risk had moderated somewhat since November
  • Committee members discussed the effects of Cyclone Gabrielle and other recent severe weather events
  • Members noted the rapid pace and extent of tightening to date implies monetary policy is now contractionary
  • Economic impacts discussed by the committee from weather events included the immediate upward pressure on some prices
  • Committee agreed that the medium-term impacts of the severe weather events do not materially alter the outlook for monetary policy
  • Committee agreed that housing market related activity was a downside risk
  • As debt servicing costs rise, spending decisions for many households will become increasingly constrained
  • As in the November statement, the central projections show a decline in GDP this year
  • Resilience of household balance sheets is seen as a downside risk
  • Background to this:

RBNZ Projected Rate Path

  • RBNZ sees official cash rate at 5.14% in June 2023 (prior 5.41%)
  • Official cash rate at 4.57% in March 2023 (previously at 4.03%)
  • At 5.5% in March 2024 (prior 5.5%)
  • Sees official cash rate at 5.5% in June 2024 (prior 5.5%)
  • Sees official cash rate at 4.05% in march 2026
  • Sees NZD TWI around 71.5 in March 2024 (prior 70.0)
  • Sees annual cpi 4.2% by March 2024 (prior 3.8%)

Release date 22 February 2023

Source: RBNZ

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