New Zealand Central Bank Hikes Rate Further
July 12 2022 - 8:46PM
RTTF2
The New Zealand central bank raised its interest rate for the
sixth straight time and vowed to continue its tightening mode to
bring inflation back to the target.
The Monetary Policy Committee of the Reserve Bank of New Zealand
on Wednesday decided to lift the Official Cash Rate to 2.50 percent
from 2.00 percent, as widely expected. The latest action has taken
the interest rate to its highest level since March 2016.
Members said it remains appropriate to continue to tighten
monetary conditions at pace to maintain price stability and support
maximum sustainable employment.
The committee agreed to maintain its approach of briskly lifting
the OCR until it is confident that monetary conditions are
sufficient to constrain inflation expectations and bring consumer
price inflation to within the target range, the bank said in a
statement.
Although there are near-term upside risks to consumer price
inflation, and medium-term downside risks to economic activity, the
committee remained broadly comfortable with the policy path
outlined in May.
Policymakers observed that high food and energy costs together
with rising mortgage interest rates will weigh on the discretionary
spending of households in coming quarters. With the emerging
worries about the health of the economy, interest rates are set to
peak around 3.5 percent rather than the 4.00 percent predicted by
the RBNZ and financial markets, Capital Economics economist Marcel
Thieliant said. Employment is likely to rise a bit faster than the
central bank anticipates, which will contribute to a more rapid
moderation in inflation, the economist noted. The upshot is that
the bank is likely to cut rates by 50 basis points in the second
half of next year.
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