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New Zealand Monetary Policy May 2022

New Zealand: RBNZ tightens its stance again in May

At its 25 May meeting, the Reserve Bank of New Zealand (RBNZ) decided to hike the official cash rate to 2.00% from 1.50%, marking the fifth consecutive increase. The Bank’s decision was aimed at constraining domestic demand in order to not add pressure on productive capacity. Russia’s invasion of Ukraine has further intensified inflationary pressures by increasing supply constraints and raising fuel and other commodity prices. That said, the domestic economy shows underlying strength amid easing Covid-19 related restrictions, sizable fiscal support and robust external demand. Moreover, the Bank reiterated that employment lies above its maximum sustainable level, providing additional justification for the rate hike.

Looking forward, the Bank stated that it will “continue to lift the OCR at pace to a level that will confidently bring consumer price inflation to within the target range” of 1.0–3.0% by balancing aggregate supply and demand.

The next monetary policy meeting is scheduled for 13 July.

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