Stronger inflationary pressures recently came as a surprise to New Zealand’s central bank, and is why the cash rate will rise to 4% earlier, according to monetary policy committee member Adam Richardson.
“The inflation shock that’s happening around the world continues to spill over into domestic prices a bit more than we thought. What we tend to find is that domestic inflation is much more persistent than imported inflation,” he told The Wall Street Journal.
New Zealand’s central bank last week raised interest rates by 50 basis points for the fourth straight session, to 3%.
Its forecasts show that the rate could rise to 4% later this year or early next year, while in May it expected this to happen in the second quarter of 2023.
If these forecasts are confirmed, the central bank will have raised interest rates by 375 basis points in just over a year.
The monetary policy committee at its August 17 meeting considered all options for the size of the rate hike, but a smaller move of 25 basis points did not have much appeal.
Source: Capital
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