MNI BRIEF: RBNZ's Orr Warns Of Stress Risk As Rates Rise

Reserve Bank of New Zealand Governor Adrian Orr warned of stresses in businesses and amongst households as interest rates rise and asset prices adjust in a speech on Thursday.

He said New Zealand's financial system was "well placed" to support the economy given strong bank capital and liquidity positions, while profitability and asset quality were high. Orr said of "critical importance" to financial stability will be the "robustness" of the labour market. Orr also highlighted the challenges posed by a strong U.S. dollar. "Those nations with floating exchange rates - such as New Zealand - are experiencing higher imported cost pressures, which can lead to longer-term embedded inflation if expectations become unanchored."

The RBNZ next meets on November 23 and is expected to consider a 75bps hike in rates as inflation pressures remain elevated. (See MNI BRIEF: CPI Shock May Push 75bp Hike On To RBNZ Radar)