RBNZ raised OCR by 25bps to 1.00% as widely expected. Additionally, it will start to start reduction of the bond holdings under the Large Scale Asset Purchase program through “both bond maturities and managed sales.
The central bank also said “further removal of monetary policy stimulus is expected over time given the medium-term outlook for growth and employment, and the upside risks to inflation.”
In the minutes, it’s noted, “when deciding whether to move the OCR up by 25 or 50 basis points, many members saw this as a finely balanced decision.”
However, firstly, the active sales of bond holdings may “put some upward pressure on longer-term interest rates”. Also, the OCR is expected to “peak at a higher level than assumed” at the November MPC. The OCR peak was raised to around 3.4% in 2024, compared to 2.6% in November review.
Hence, the Committee came to a consensus of a 25bps hike, but “affirmed that it was willing to move the OCR in larger increments if required over coming quarters.”
