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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.
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.