New Zealand’s Tenth Central Bank Rate Hike
February 22, 2023
New Zealand’s Official Cash Rate has undergone its tenth hike since October 2021, and the 50-basis point increase matched market expectations. Although not a surprise, the Reserve Bank of New Zealand policymakers haven’t been deterred from getting ahead of inflation despite the country’s recent devastating cyclone underscores a reality that investors bet against central bank tightening at their own peril. The new cash rate level is 4.75%, 450 basis points above the pandemic low and at a 14-year high. A released statement makes a strong case for tightening in the face of excessive 7.2% inflation, elevated price expectations, an inflationary global environment, and domestic demand that although starting to ease still exceeds available supply.
The recovery from recent severe storms in the North Island is likely to
add to near-term inflation, short-run production volatility, and medium-term activity. Higher interest rates are still needed to meet our inflation and
employment objectives, to the same extent as in the November
Statement.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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