A hawkish RBNZ considered a 100bp hike but went with 75bp, lifting rates to 4.25%, saying rates needed to get to a higher level "sooner than previously indicated".
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.