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 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 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