New Zealand skyline

New Zealand Monetary Policy July 2022

New Zealand: RBNZ tightens its stance again in July

At its 13 July meeting, the Reserve Bank of New Zealand (RBNZ) hiked the official cash rate to 2.50% from 2.00%, marking the sixth consecutive increase. The Bank’s decision was aimed at keeping inflation expectations anchored following recent increases in price pressures: Inflation rose to a more than 30-year high in Q1. Price pressures have been stoked by the impact of the war in Ukraine on the supply of commodities, as well as by rising domestic demand, amid record low unemployment rates, loosened Covid-19 restrictions and considerable fiscal support. The Bank thus raised rates to bring robust aggregate demand and constrained aggregate supply into balance in order to cool price pressures.

Looking forward, the Bank stated that it will “continue to lift the OCR to a level where it is confident consumer price inflation will settle within the target range” of 1.0–3.0%, adding that “once aggregate supply and demand are more in balance, the OCR can then return to a lower, more neutral, level”. The Bank stated that the path of the OCR projected in its recent May Monetary Policy Statement report would be “broadly” consistent with this goal. According to the report, rates are projected to end Q3 2022 at 2.70% and Q4 2022 at 3.40%, before peaking at 3.90% in Q2 2023 and declining from Q4 2024 onward.

Commenting on the release, Lee Sue Ann, economist at UOB, stated:

“We had previously expected the RBNZ to tune back to the more usual pace of 25bps hikes from July onwards. Today’s 50bps move to a 2.50% policy rate would make the RBNZ ahead of most other central banks in lifting borrowing costs to combat rising inflation, but also seen taking the benchmark rate above a neutral level, which it deems to be 2%.”

The next monetary policy meeting is scheduled for 17 August.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest