The Reserve Bank of New Zealand raised its Official Cash Rate from 0.50% to 0.75% as expected as capacity pressures have continued to tighten. RBNZ says headline CPI inflation is expected to measure above 5 percent.

Reserve Bank of New Zealand raise its Official Cash Rate from 0.50% to 0.75%
The rise in the official cash rate comes after last month’s which was the first since 2014 when the OCR hit a post-GFC peak of 3.5 per cent.
RBNZ projections for the path ahead:
- Sees official cash rate at 0.94% in March 2022 (previously 0.86%)
- at 2.14% in December 2022 (pvs 1.62%)
- at 2.3% in March 2023 (pvs 1.77%)
- at 2.61% in December 2024
- Sees annual CPI 3.3% by December 2022 (pvs 2.2%)
Statement Highlights
- Says headline CPI inflation is expected to measure above 5 percent in the near term before returning towards the 2 percent midpoint over the next two years.
- says immediate relative price shocks risk generating more generalized price rises
- capacity pressures have continued to tighten
- broad range of economic indicators highlight that the New Zealand economy continues to perform above its current potential.
- household spending and business investment will be dampened in the near-term by ongoing covid-19 health uncertainties
- says recent nationwide health-related lockdown and restrictions in Auckland resulted in a sharp contraction in economic activity
- says capacity pressures have continued to tighten
RBNZ Governor Orr Press conference
- Reopening of the New Zealand border does not change the policy outlook
- 25bp hike gives more options, can take time at this point
- Not worried about rising wages, these have been well behaved
- Given huge debt loads we must exercise caution
- House price rises will alleviate as interest rates rise
- Orr says he sees steady 25bp steps as the balanced approach for now
- sees the OCR (official cash rate) at 2.5% by the end of 2023
KiwiBank Commentary:
The time of cheap money is over, and interest rates are rising, swiftly. The RBNZ hiked the cash rate 25bps today, and signaled many more to come.

Source: RBNZ
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