Rate Hikes at the Reserve Bank of New Zealand and the Central Bank of Iceland

November 23, 2022

Although not a surprise to investors, the Reserve Bank of New Zealand official cash rate was increased by a larger 75-basis point increment to 4.25%. The prior five changes had been each an increase of a half percentage point. At the start of the tightening cycle in October 2021, the rateĀ  had been just 0.25%. RBNZ officials expect CPI inflation to rise further and are worried about inflation expectations. The OCR may need to climb an additional 1-1.25 percentage points over the coming year.

The Central Bank of Iceland’s policy interest rate was raised 25 basis points to 6.0%. Tightening there began in May 2021 from 0.75% where such had been since November 2020. 6.0%, the new level, is its highest in 103 months. The pace of increase was reduced at the October meeting to 25 basis points after being lifted 350 bps in four steps earlier this year between February and August. CPI inflation of 9.4% ast of October was up from 4.5% a year earlier.

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

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