Reserve Bank of New Zealand Raise Rates by 75bp to 4.25% to Highest Since January 2009

The Reserve Bank of New Zealand aggressive hiking cycle continues. It raised its Official Cash Rate by another 75 bps to 4.25%, as expected. The RBNZ says its committee debated a +75 or +100bp hike. 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 December 2023 (previously at 4.1%).


The Reserve Bank of New Zealand raised the cash rate to 4.25% from 3.50%.

New Zealand’s central bank delivered its eighth 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

  • Monetary conditions need to tighten further
  • Remains resolute in achieving monetary policy remit
  • Productive capacity of the economy is being constrained by broad-based labour shortages, and wage pressures are evident
  • Core consumer price inflation is too high, employment is beyond its maximum sustainable level,
  • Household spending remains resilient
  • Employment levels are high, and income growth and household savings are supporting spending
  • Committee agreed that the OCR needs to reach a higher level, and sooner than previously indicated,
  • Aggregate demand continues to outstrip New Zealand’s capacity to supply goods and services
  • Near-term inflation expectations have risen.
  • A range of indicators continue to signify broad-based inflation pressure
Reserve Bank of New Zealand Interest Rate

From the Minutes:

  • Committee gave consideration to an increase in the ocr of 75 or 100 basis points
  • Members agreed that a larger increase in the ocr was appropriate
  • Members agreed ocr needed to reach a level where it was confident it would reduce actual inflation to within the target range
  • Members agreed that this level had increased since the time of the august statement
  • Committee agreed that the level of settlement cash balances is not a source of unexpected inflationary pressure
  • Members viewed the risks to inflation pressure from fiscal policies as skewed to the upside

RBNZ Projected Rate Path

  • official cash rate at 4.57% in March 2023 (previously at 4.03%)
  • official cash rate at 5.5% in December 2023 (previously at 4.1%)
  • twi nzd at around 70.0% in December 2023 (previously at 71.7%)
  • annual cpi 5.0% by December 2023 (previously at 3.8%)
  • official cash rate at 5.5% in march 2024 (previously at 4.09%)
  • official cash rate at 4.35% in December 2025

Release date 23 November 2022

Source: RBNZ

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