The Reserve Bank of New Zealand has raised interest rates by 2 percent from 0.5 percent points to fight to curb inflation, which is currently the highest 6.9 percent in 30 years.
This has risen 50 basis points (bp) to 2% for the second year in a row, indicating that the Reserve Bank of New Zealand will make further increases to bring inflation back to its target range of 1-3%.
“The Commission has agreed that it is appropriate to continue to tighten monetary conditions in order to maintain price stability and support maximum sustainable employment,” the Monetary Policy Committee said. Said..
He said New Zealand’s underlying economy remains strong, supported by a strong labor market, a healthy household balance sheet and continued financial support.
However, headwinds were strong, global economic uncertainty increased, and high inflation curtailed global consumer confidence.
“The Commission has agreed to continue raising the official discount rate to a level that ensures that the consumer price index is within the target range,” he said.
He noted that global economic activity could slow faster than expected and slow growth.
The Reserve Bank predicts inflation will peak at 7% in the first half of 2022, and the Central Bank predicts that cash rates will reach about 3.5% by the end of this year and reach 4% in 2023. , The rate hike is almost ahead of schedule. ..
“A significant and early increase in the official cash rate reduces the risk of sustained inflation while providing more flexible policies in the face of the highly uncertain global economic environment.”
Economists widely expect a 50bp increase in May, and Westpac analysts expect the Commission to make another 50bp increase three more times in the future.
Craig Ebert, senior economist at the Bank of New Zealand, said the Reserve Bank was suddenly nervous about reaching the range of the inflation target, knowing the impact of monetary policy on the labor market.
“Looking at today’s monetary policy statement, we are taking full advantage of the World Bank’s positive signal and expect a 50-point increase to 2.50 percent in the July monetary policy review,” he said. Said..
Sharon Zollner, chief economist at Ebert and ANZ, said the tone of the statement was unexpectedly “hawkish.”
“today, [Reserve Bank]As expected, but unexpected was the “All Guns Blazing” approach to future inflation risk.
“Today, the RBNZ certainly talked tough, but [Reserve Bank] Attention to the risk of hard landing will bring us back to a more standard tightening pace of 25bp at each meeting after August. “
Kevin Davidson, chief economist at real estate research group CoreLogic, said the impact of rate hikes on the housing market is clear.
“We haven’t reached the end of this rising cycle of mortgage rates yet, and it will hold some downward pressure on asset values,” he says. Said.. “But that calculation date will occur within the next 12 months.”
“For the record [Reserve Bank] House prices show that they can fall by about 12 percent from peak to trough. “
Raising concerns over the recession could settle cash rates lower than currently expected, Davidson said, while sustained low unemployment protects the market from some significant decline. Said it would be useful.
“But it’s likely that the current modification of the property value isn’t finished yet,” he said.