- RBNZ announces 0.25bp rate hike. This was widely expected (Adam’s preview is here)
- Takes the official cash rate (OCR) to 3%
- The RBNZ hiked rates at their previous meeting also and are telegraphing more hikes to come, data dependent.
From the RBNZ statement:
- Says speed and scale of rate rises will depend on future data
- Future rate rises will also depend on high NZD impact on inflation pressures
- Headline inflation is moderate but inflationary pressures are increasing, “and are expected to continue doing so over the next two years.”
- Estimates gdp growth +3.5 pct in year to March
- Says the high NZD is a headwind, offsets tradeable inflation but current level unsustainable
- Will raise rates to keep future inflation near 2%
- Notes that while export commodity prices are high, dairy prices down in recent months
- Sees moderation in the housing market on lending limits and rising interest rates to help
- Says current exchange rate is not sustainable
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Meanwhile, the NZD/USD has bounced a bit on the announcement, up around 30 points as I type. The headwind for the NZD at present is market positioning (i.e long … d’uh). The accompanying statement sets a hawkish tone, there will be more rate hikes to come but the timing is now less of a certainty.
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Reaction from Westpac:
- The RBNZ noted that export commodity prices remain very high but auction prices had fallen 20% recently
- The RBNZ said that the high exchange rate seemed to shift higher in importance, it was mentioned in the context of the speed and extent of future hikes
- WPAC did say that they saw no surprises in the statement and they maintain their expectation for further 25bps OCR hikes in June, July and December.
ADDED – more reactions to today’s hike here: Analyst reactions to the New Zealand rate hike today – ASB expect next RBNZ rate hike in June
