RBNZ hikes OCR by 50bps to 3.50%, as expected, while it stated that the Committee agreed it is appropriate to continue to tighten policy and members agreed monetary conditions needed to continue to tighten until inflation was back in target range
Says:
- Core consumer inflation is too high and labour resources are scarce.
- Level of domestic spending remained resilient to date.
Minutes:
- Committee considered whether to increase the OCR by 50bps or 75bps.
- Members agreed the OCR needed to reach a level where the Committee could be confident it as sufficient to maintain expectations of low inflation in the longer-term and bring consumer inflation back to the target range.
- Some members highlighted that a larger increase in the OCR now would reduce the likelihood of a higher peak in the OCR being required.
- New Zealand productive capacity is still being constrained by labour shortages and wage pressures are heightened.
Reaction details (02:10)
- NZD/USD immediately moved higher by 20 pips to 0.5750 from 0.5730 and continued to move higher to trade at 0.5780 10 minutes after the announcement.
Analysis details (02:18)
- The RBNZ was widely expected to deliver its 5th consecutive 50bps increase as money markets had priced in an 84% chance of such a move before the announcement, while the central bank's rhetoric doesn't provide anything to suggest an immediate slowdown in the rate hike cycle as it noted that members agreed monetary conditions needed to continue to tighten until inflation was back in target range and that core consumer inflation is too high. Furthermore, the central bank considered either a 50bs or 75bps increase at this meeting and some members also highlighted that a larger increase in the OCR now would reduce the likelihood of a higher peak in the OCR being required, while the RBNZ's rhetoric and actions could also be perceived as even more hawkish as it was at a contrast to the recent slowdown in the pace of rate hikes by the RBA yesterday.
05 Oct 2022 - 02:00- Fixed IncomeImportant- Source: Newswires
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