The Reserve Bank of New Zealand (RBNZ) announced this Wednesday interest rate hike of 50 basis pointsas expected, raising it to 3.5% from the previous 3%. This is the eighth consecutive increase in rates, which reach their highest level since April 2015.
RBNZ Statement
The committee agreed that it remains appropriate to continue tightening monetary conditions at the pace necessary to maintain price stability and contribute to maximum employment sustainability. Underlying consumer price inflation is too high and labor resources are tight.
Global pressures on consumer prices remain high. World demand for goods and services is outstripping supply capacity, pushing prices up. Food and energy prices are being hit especially hard by the war in Ukraine.
The recent decline in oil prices and the easing of some supply chain constraints have caused measures of headline inflation to decline in some countries. However, core inflation measures have risen and persist. Central banks are tightening monetary conditions, implying a weaker growth outlook for New Zealand’s trading partners.
In New Zealand, the level of domestic spending has remained resilient to date, in the face of the slowdown in world growth and the rise in domestic interest rates. Employment levels are high and household balance sheets remain resilient despite falling house prices.
New Zealand’s productive capacity remains constrained by labor shortages and wage pressures are higher. Overall, spending continues to outstrip capacity to supply goods and services, and a number of indicators continue to point to widespread price pressures.
Committee members agreed that the Monetary conditions were to continue to tighten until they were confident that spending was contained enough to bring inflation back within their target range of 1% to 3% per annum. The Committee remains determined to fulfill the monetary policy mandate.
Source: Fx Street
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