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New Zealand: Central bank raises key interest rate by 50bp to 3%

New Zealand’s central bank, as expected, raised its key interest rate by 50 basis points and said it would continue to tighten monetary policy, at least to the 4% level.

The bank’s moves bring the Oceanian country to the forefront of the global tide of monetary policy tightening.

The Monetary Policy Committee decided to raise the key interest rate to 3%, pledging to move faster on the path of monetary policy tightening, which sent the country’s government bond yields higher.

“The communication message from the RBNZ today was clearly hawkish,” Andrew Ticehurst of Nomura Holdings told Bloomberg. “Many market players expected a possible dovish turn today” and will now have to adjust to reality.

New Zealand’s monetary policymakers are trying to follow in the footsteps of their American counterparts at the Federal Reserve, who are struggling to tame the most galloping inflation in 40 years without doing serious damage to economic growth.

Over the past 10 months, the central bank has raised its key interest rate by a cumulative 2.75%, in the most aggressive monetary tightening cycle in more than 30 years that has begun to aim to control inflation through interest rate policy.

According to the RBNZ’s updated forecasts, its key interest rate is expected to peak in the second half of 2023 at 4.1%, up from the 3.95% it forecast in May. The reverse easing cycle is expected to begin in 2024 on current data.

Source: Capital

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