New Zealand: RBNZ tightens its stance again in October
At its 5 October meeting, the Reserve Bank of New Zealand (RBNZ) hiked the official cash rate to 3.50% from 3.00%, marking the eighth consecutive increase. The Bank’s decision was aimed at keeping inflation expectations anchored amid sustained increases in price pressures. Price pressures have been fed by: the impact of the war in Ukraine on commodity prices, resilient domestic demand amid a tight labor market, and supply not keeping pace with demand. Therefore, the Bank raised rates to bring robust aggregate demand and limited aggregate supply into balance, thereby cooling price pressures.
Looking forward, the Bank stated that “monetary conditions need to continue to tighten until […] there is sufficient restraint on spending”, in order to bring inflation within the 1.0–3.0% target band.
Commenting on the release, Lee Sue Ann, economist at UOB, stated:
“We see the RBNZ on track to continue hiking the OCR to 4.00% by the end of this year, as per our forecasts. Thereafter, we see the RBNZ on hold, as we are mindful that it will not want the economy to tip over into recession and for unemployment to rise sharply, as it aims to strike a balance with higher interest rates slowing the economy and inflation.”
The next monetary policy meeting is scheduled for 23 November.