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MNI BRIEF: RBNZ Hikes 75bp; Lifts Cash Rate Peak to 5.5%

(MNI) Perth

The Reserve Bank of New Zealand considered a 100bp rise but went with a 75bp hike as it assessed that rates needed to be lifted to a higher rate "sooner than previously indicated", after a meeting of its Monetary Policy Committee on Wednesday.

The hawkish tone that accompanied the hike in the Official Cash Rate to 4.25%, the highest level since early 2009, was underscored by an increase in the bank's forecast for rates to peak at 5.5% by September next year in the accompanying Monetary Policy Statement, well up from the 4.1% peak forecast in August's statement.

The committee considered hikes of between 50bp and 100b but focused on a choice between 75bp and 100bp, with 75p considered "appropriate". The RBNZ next meets in February.

"The Committee agreed that the OCR needs to reach a higher level, and sooner than previously indicated, to ensure inflation returns to within its target range over the medium-term. Core consumer price inflation is too high, employment is beyond its maximum sustainable level, and near-term inflation expectations have risen," the RBNZ said.

The Monetary Policy Statement showed annual CPI peaking at 7.5% this quarter and Q1 2023, up from a peak of 6.4% previously forecast. The RBNZ now forecasts four consecutive quarters of negative quarter-on-quarter growth spanning Q2 2023 to Q1 2024 as the cumulative impact of 450bp of tightening since October 2021 weighs on growth.

Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

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