MNI INTERVIEW: Former RBNZ Chair Calls For 50bps Rate Hike

A former senior Reserve Bank of New Zealand official has called for a 50-basis points hike when the central bank meets on Wednesday.

Arthur Grimes, a former RBNZ Chairman and chief economist, who is now a senior fellow at consultancy Motu Economic and Public Policy Research, said a 50 basis was his assessment, but a rise of 25 basis points is more likely, see: MNI STATE OF PLAY: Rate Hike Expected From RBNZ.

LUDICROUS AND WRONG

Grimes called on the RBNZ to raise interest rates "aggressively" in response to an overheating economy, where house price increases – up 30% in the year to July - had become "ludicrous."

"RBNZ policy has been far too populist, and they have got it completely wrong," said Grimes.

He also called on the RBNZ to reduce the size of its balance sheet, saying it had increased from NZD30 billion to over NZD80 billion in the last 18 months.

OFFICAL CASH RATE, SUPPORT MEASURES

The RBNZ has held its Official Cash Rate at a record low of 0.25% since March 2020 as it eased policy to combat the economic impact of the pandemic.

The bank also initiated a bond buying program and purchased NZD53 billion of Government bonds, falling well short of the NZD100 billion limit. The program of QE was cancelled last month.