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The Reserve Bank of New Zealand hiked the official cash rate by 50bp to 4.75% after judging inflation risks had "moderated somewhat" since its last meeting in November.
Despite the deceleration in tightening from the 75bp hike unveiled in November and acknowledging monetary policy was contractionary, the RBNZ's Monetary Policy Statement (MPS) maintained its forecast for a peak rate of 5.5%. A 50bp hike was in line with expectations. (See MNI RBNZ WATCH: 50bps Seen As Inflation Pressures, Jobs Ease)
The Committee discussed both a 50bp and 75bp hike but they assessed that while the balance of risks around inflation were skewed to the upside, the extent of the risk had moderated somewhat since the November Statement. "As a result, a 50 basis point move balanced the need to ensure core inflation and inflation expectations fall, against the early signs that demand was beginning to moderate towards the economy’s productive capacity," the RBNZ said.
The Monetary Policy Statement also revealed a changed growth profile. Growth is expected to contract over three consecutive quarters staring in Q2 compared to a four quarter contraction forecast in the November MPS. Inflation is also seen higher than previously estimated by the end of the year, with the CPI forecast to rise at a 5.3% y/y pace compared to 5% y/y in the November MPS.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.