NZD – RBNZ hikes cash rate by 25bps as expected

Reserve Bank of New Zealand

Forecasts ….

  • RBNZ sees official cash rate at 1.49% in June 2022 (pvs 1.51%)
  • RBNZ sees official cash rate at 2.57% in March 2023 (pvs 2.3%)
  • RBNZ sees twi nzd at around 71.6% in March 2023 (pvs 75.1%)
  • RBNZ sees annual cpi 3.2% by march 2023 (pvs 2.9%)
  • RBNZ sees official cash rate at 2.84% in June 2023 (pvs 2.4%)
  • RBNZ sees official cash rate at 3.35% in March 2025

RBNZ minutes:

  • committee also affirmed that it was willing to move
    the OCR in larger increments if required over coming quarters
  • OCR is expected to
    peak at a higher level than assumed at the November statement
  • sales of the bank’s
    LSAP bond holdings may put some upward pressure on longer-term
    interest rates
  • many members saw
    this as a finely balanced decision whether to move the OCR up by 25
    or 50 basis points
  • committee agreed
    that higher interest rates were consistent with house prices becoming
    more sustainable
  • impulse to growth
    from fiscal support is now ebbing and will wane
  • committee reached a consensus not to reinvest the proceeds for any upcoming LSAP maturities

RBNZ says

  • says committee agreed that further removal of monetary policy
    stimulus is expected over time
  • says headline cpi
    inflation is well above the reserve bank’s target range, but will
    return towards the 2 percent midpoint over coming years
  • employment is now
    above its maximum sustainable level
  • says broad
    range of economic indicators highlighting that the New Zealand
    economy continues to perform above its current potential.
  • says managed sales
    of bond holdings, in addition to not investing the proceeds of
    maturities, were most consistent with achieving their mandate over
    time
  • says intends to
    commence bonds sales in July

Headlines summary above is via Reuters

The hike was as expected although some had been tipping 0.5%. The statement, minutes, and forecasts are all leaning more hawkish, the jump in NZD/USD reflecting this.

Governor Orr is up next, at 0200 GMT. The guy is a man of action, not waffle like some other central bankers.

RBNZ Orr chuck norris meme

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