Reserve Bank of New Zealand Raised Rate 25 Basis Points With Cost Pressures More Persistent

The Reserve Bank of New Zealand raised its Official Cash Rate from 0.25% to 0.5% as expected. Despite the persistent Delta variant outbreak expectations cost pressures are becoming more persistent. The move follows Mexico and Brazil Raising Rates.

The Reserve Bank of New Zealand raised its Official Cash Rate from 0.25% to 0.5% as expected. Despite the persistent Delta variant outbreak expectations cost pressures are becoming more persistent. The move follow Mexico and Brazil Raising Rates.

RBNZ

Reserve Bank of New Zealand raise its Official Cash Rate from 0.25% to 0.5%

The rise in the official cash rate is the first since 2014 when the OCR hit a post-GFC peak of 3.5 per cent.

Statement Highlights

  • monetary stimulus further reduced
  • appropriate to continue reducing the level of monetary stimulus
  • further removal of monetary policy stimulus is expected over time
  • cost pressures are becoming more persistent
  • current covid-19-related restrictions have not materially changed the medium-term outlook for inflation and employment
  • capacity pressures remain evident in the economy
  • economic activity will recover quickly as alert level restrictions ease
  • headline cpi inflation is expected to increase above 4 percent in the near term
  • inflation to return towards 2 percent midpoint over the medium term

Minutes Highlights

  • the committee noted that further removal of monetary policy stimulus is expected over time
  • future moves contingent on the medium-term outlook for inflation and employment.
  • policy stimulus will need to be reduced to maintain price stability and maximum sustainable employment over the medium term.
  • demand shortfalls are less of an issue than the economy hitting capacity constraints
  • number of factors are expected to constrain house prices over the medium term
  • the committee will be watching closely how the economy adjusts to the ongoing disruption from endemic covid-19
  • early data suggest that business and consumer confidence remained robust during the latest lockdown

ANZ and Kiwibank raise mortgage rates after Reserve Bank hikes OCR to 0.5%

  • ANZ, the country’s biggest bank, announced within minutes that it was increasing the interest rates on its floating and ‘flexi’ home loans by 0.15 percentage points, taking its floating rate to 4.59 per cent.
  • Kiwibank followed, announcing its floating and offset mortgage rates would rise by 0.25 percentage points to 4 per cent, and its revolving rate by the same amount to 4.05 per cent.

Source: RBNZ

From a Sunburnt Country…

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