At its monetary policy meeting on July 13, the Reserve Bank of New Zealand (RBNZ) announced a 50 basis point increase in the Official Cash Rate (OCR), raising it from 2% to 2.5%, as expected widely.
The RBNZ has stated: “The Committee agreed that it remains appropriate to continue to tighten monetary conditions at the pace necessary to maintain price stability and support maximum sustainable employment.“.
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still appropriate keep tightening the policy monetary.
Conditions will be tightened at the rate necessary to maintain price stability and support maximum sustainable employment.
The Committee stands firm in its commitment to ensure that consumer price inflation is brought back within the target range of 1% to 3%.
The Committee has agreed to continue raising the OCR to a level where it is confident that consumer price inflation will be within the target range.
Once aggregate supply and demand are more balanced, the OCR will be able to return to a lower, neutral level..
Spending and investment demand continues to outstrip supply capacity, with a wide range of indicators highlighting widespread inflationary pressures.
The committee recognized that there is a short-term upside risk to consumer price inflation and emerging medium-term downside risks to economic activity.
Employment remains above its maximum sustainable level and central bank measures of core inflation stand at around 4%.
Most economists were expecting the RBNZ to hike rates by 50 basis points to 2.50% at its July 13 meeting, while they expect the OCR to hit 3.50% or more later this year.
Why is the RBNZ rate decision important to traders?
The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing its decision on interest rates and the economic assessments that influenced its decision. The central bank offers clues about the economic outlook and future policy trajectory, which are highly relevant to the valuation of the NZD. Positive economic developments and optimistic outlook could lead the RBNZ to tighten policy by raising interest rates, which tend to be bullish on the NZD. Policy announcements are generally followed by Governor Adrian Orr’s press conference.
Source: Fx Street
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