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MNI (Sydney)

A former Reserve Bank of New Zealand official has urged the central bank to hike interest rates by 50 basis points at its meeting this week, saying that inflation is at a “tipping point” and strong action is needed.

Sharon Zollner, the RBNZ’s senior economist for eight years to 2006 and currently chief economist at ANZ Bank, told MNI in an interview that although there were significant downside risks to the economy “this is still no reason not to hike.”


“If you let inflation expectations get away from you the window of opportunity to get on top of inflation without a hard landing is closed,” Zollner said, see: MNI STATE OF PLAY: RBNZ Eyes Rate Hike Surge To Whip Inflation.

“And then you will require a hard landing to control inflation if you allow inflation to take off.”

Like the U.S. Fed, the RBNZ's rate hike path has drawn strong views on the timing and pace of needed hikes from well-known analysts and staff since late last year.

The RBNZ, which meets on April 13, has raised rates by 25bps at its last three meetings since October and its Official Cash Rate now stands at 1.0%.

At 3.5% By April 2023

Zollner said she was advocating a 50bps hike now, followed by another 50bps in May and then 25bps increases until the OCR reached 3.5% by April 2023.

She said that inflation, currently at a three decade high of 5.9%, was at a “tipping point” and she expected it to exceed 7% in this current cycle. The RBNZ inflation target range is between 1% and 3%.

Under the RBNZ’s policy of “least regrets”, Zollner said the central bank had “flipped” from seeing the biggest regret as near-term unemployment to now seeing it as “long term inflation out of control.”


Even though the OCR had been raised three times, “real interest rates are lower than when they started hiking” due to the pace of inflation.

“The housing market is vulnerable, consumer confidence is on the floor and business confidence is looking wobbly, so raising rates is risky but not raising rates by 50bps is riskier,” Zollner said.

MNI Sydney Bureau | +61-405-322-399 |
MNI Sydney Bureau | +61-405-322-399 |

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