Free Trial

MNI STATE OF PLAY: Rate Hike Expected From RBNZ

MNI (Sydney)
SYDNEY (MNI)

The Reserve Bank of New Zealand's Monetary Policy Committee meets this week with expectations of an interest rate hike, potentially by as much as 50 basis points on inflation concerns.

The RBNZ has held rates on hold at the record low of 0.25% since March 2020 as one of a number of measures to stimulate the economy through the pandemic, but the NZ economy has become increasingly overheated, as reported: MNI STATE OF PLAY: RBNZ Toughens Up In A Hotter Than Expected Economy.

An August rate rise could be the first of several for the RBNZ over the next 12 months as it changes outlook and seeks a soft landing for the economy. Two former RBNZ officials, Grant Spencer and Sharon Zollner told MNI in the past month that a series of rate hikes are on the way.

The RBNZ in July ended any additional purchases under its Large Scale Asset Purchase (LSAP) bond buying programme.

But the RBNZ elected in July to continue with its Funding for Lending Program, which offers low-cost funding to commercial banks, and could end this facility at the meeting on Wednesday, Aug. 18.

INFLATION HEADED NORTH

Inflation has surged to 3.3%, north of the central bank's 1% to 3% target range. While this is expected to fall back, an RBNZ survey last week showed inflation was expected to be at 3.02% one year ahead.

Driving the momentum for inflation is the booming property market, with house prices up 30.6% in the 12 months to the end of July, according to data from the Real Estate Institute.

GDP growth was at 1.6% for the first quarter of 2021 and is expected to be close to 4% for 2021. Unemployment is at 4.7%, with reports of labour shortages in some industries.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com

To read the full story

Close

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.