RBNZ
The RBNZ hiked rates by an outsized 75bp to 4.25%, the highest since December 2008. The move was as expected by those surveyed on Bloomberg. This brings the total amount of tightening this cycle to 400bp, the most of any OECD central bank.
- The RBNZ committee discussed possible 50, 75 or 100bp hikes and the benefits of consistency in the size of increments. It decided that rates needed to be higher sooner for it to meet its objectives and because the labour market is at capacity and holding the economy back, inflation expectations are rising and core inflation is still too high. The balance of risks ruled out an even larger 100bp. So, the consensus decision was for a 75bp move.
- The RBNZ’s rate profile was also lifted substantially from August. The central bank is now projecting a terminal rate of 5.5% compared with just above 4% previously. Rates are still expected to begin declining in mid-2024 but ending 2025 closer to 4.5% rather than 3.5%.
- The domestic economy remains resilient and consumption elevated supported by strong employment and a strong recovery in tourism. The RBNZ also noted that wage pressures were evident. However, it said that the full impact of its tightening to date was yet to pass through to the economy and they are expecting a recession in mid-2023 with activity contracting 1%.
- See November Monetary Policy Statement here.
OECD policy rates %
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