RBNZ Ups OCR 50bps To 1.5%; More Hikes To Come

By Sophia Rodrigues

(Sydney, April 13, 2022)—The Reserve Bank of New Zealand raised the official cash rate by 50 basis points to 1.5%, becoming the first developed-country central bank to deliver a larger hike in the current global tightening cycle.

In a statement Wednesday, the RBNZ described the move as “monetary tightening brought forward” and said that taking the OCR to a more neutral stance sooner will reduce the risk of rising inflation expectations.

The tone of the statement was hawkish and indicated more hikes in larger increments are likely as keeping longer-term inflation expectations anchored remains the RBNZ’s top priority in line with its recently revised least regrets approach.

“The Committee will remain focused on ensuring that current high consumer price inflation does not become embedded into longer-term inflation expectations,” the RBNZ said.

The RBNZ said the economy continues to remain strong, supported by sound balance sheets, continued, fiscal support and strong export earnings.

While global economic uncertainty and inflation are dampening consumer confidence, the more pressing concern for the RBNZ was capacity pressures. “Employment is above its maximum sustainable level and labour shortages are impacting many businesses,” the RBNZ said.

--Contact: Sophia@centralbankintel.com