A Second Hike of the Reserve Bank of New Zealand’s Official Cash Rate

November 24, 2021

An initial OCR increase of 25 basis points had been done in October, and such has been followed by a second hike of same size to 0.75%. The rate had been previouslyat a record low of 0.25% from mid-March 2020.  A released statement sees continuing reductions in monetary stimulus.

Capacity pressures have continued to tighten. For example, employment is now above its maximum sustainable level. A broad range of economic indicators highlight that the New Zealand economy continues to perform above its current potential. 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. The near-term rise in inflation is accentuated by higher oil prices, rising transport costs and the impact of supply shortfalls. These immediate relative price shocks risk generating more generalized price rises given the current domestic capacity constraints.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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