New Zealand Interest Rate Hike

May 25, 2022

The Reserve Bank of New Zealand’s official cash rate was raised by the expected amount, 50 basis points to 2.0%, but the released statement ramps up the commitment to restoring price stability.

The Committee is resolute in its commitment to ensure consumer price inflation returns to within the 1 to 3 percent target range. Consistent with the economic outlook and risks ahead, monetary conditions need to act as a constraint on demand until there is a better match with New Zealand’s productive capacity. A larger and earlier increase in the OCR reduces the risk of inflation becoming persistent, while also providing more policy flexibility ahead in light of the highly uncertain global economic environment.

Today’s interest rate hike in New Zealand was larger than those of 25 basis points in November and February. CPI inflation has accelerated from 1.5% in the first quarter of 2021 to 6.9% last quarter, and core consumer price inflation also exceeds the top of the central bank’s target band.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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