RBNZ +50bp rate hike (vs. +25bp widely expected)

The Reserve Bank of New Zealand have raised their cash rate target by 50 basis points, more than the +25 that was the consensus expected.

From the minutes to the meeting:

• The committee discussed 25 and 50 basis point increases at this meeting
• Committee was comfortable that current lending rates faced by businesses and households will help ensure core inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term and inflation expectations begin to moderate
• Committee is expecting to see a continued slowing in domestic demand and a moderation in core inflation and inflation expectations
• The extent of this moderation will determine the direction of future monetary policy
• Members noted the rapid pace and extent of tightening to date implies monetary policy is now contractionary
• Committee agreed it must continue to increase the official cash rate (OCR) to return inflation to the 1-3 percent target and to fulfil its remit
• Committee agreed that the full impact of this monetary tightening is yet to be fully realised
• Committee members observed that inflation is nevertheless still too high and persistent
• Members viewed the risks to inflation pressure from fiscal policy as skewed to the upside
• Economic growth in New Zealand is anticipated to slow through 2023
• New Zealand's banks are well capitalised, profitable, and have strong liquidity Liquidity Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Read this Term positions, with plenty of cash on hand
• Rebuilding following recent extreme weather events will provide a boost to activity and inflation
• Committee’s assessment is that there is no material conflict between lowering inflation and maintaining financial stability in New Zealand

• Economy is starting from a slightly weaker position than assumed in the february statement
• However, demand continues to outpace supply
• Over the medium-term, the inflationary impacts of recent severe weather events are likely to be somewhat larger than assumed at the time of the february statement
• Labour market remains strong, with employment continuing to expand

NZD/USD been marked higher

more to come