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Free AccessMNI INTERVIEW: RBNZ "Shadow Board" Member Sees 25bps Rise
A member of a "shadow board' of the Reserve Bank of New Zealand expects a rate hike of 25 basis points next week and that within 12 months official rates in NZ will be at 2%.
Jarrod Kerr is the chief economist of publicly-owned Kiwibank and a member of a shadow RBNZ board created by economic think tank the NZ Institute of Economic Research.
In an interview with MNI, Kerr said he believed that while the RBNZ is currently pondering a rate hike of as much as 50 basis points, he thinks 25 basis points was more appropriate for November.
But he said the central bank would continue to raise rates at each meeting, see: MNI STATE OF PLAY: RBNZ Hikes Rates, Signals More To Come.
The last hike did not include a Monetary Policy Statement, which is when the RBNZ usually chooses to make changes to its policy settings, as it had chosen caution and left rates unchanged in August when new Covid-19 cases were reported. New Zealand has since moved on from its "Covid Zero" policy.
"I think 50 basis points in one go is a bit aggressive," Kerr said. "I think they'll go with 25 basis points and use their forward guidance to keep the market satisfied on their outlook and intentions."
MARKET REPRICES
Kerr said the markets had already repriced wholesale and swap rates based on the changing RBNZ outlook, and clear forward guidance would enable further repricing.
The RBNZ aims to cool an overheated economy driven by accelerating inflation and a booming property market, up 30% in only 12 months.
Third quarter CPI inflation jumped higher to an annualized 4.9% and trimmed mean inflation, the RBNZ's key indicator, was not far behind in a range between 4.0% and 4.6%.
Jarrod Kerr said Kiwibank's modelling suggested that fourth quarter CPI would peak at 6% and then take some time to subside.
"There's still some inflation yet to come through," he said.
The RBNZ's Monetary Policy Committee meets next Wednesday and will also publish its updated Monetary Policy Statement.
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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.