The RBNZ delivered another 50 basis point OCR hike to 3.5%, and hinted that the urgency to deal with inflation pressures has increased.
RBNZ Monetary Policy Review, October 2022
- The Reserve Bank increased the Official Cash Rate by another 50 basis points to 3.5% and signalled more increases to come.
- The accompanying statement repeated much of the language from the August review. The RBNZ continues to tighten monetary policy “at pace”, and remains “resolute” in achieving its inflation target over the medium term.
- The RBNZ continues to emphasise the extent of inflation pressures in the New Zealand, with overheated demand and a very tight labour market.
- The main statement did not discuss the likely extent of future interest rate rises.
- However, the record of the meeting was unusually explicit in noting that the Committee debated between a 50 or a 75 basis point hike.
- The latter was argued on a ‘stitch in time’ basis: a larger increase now could reduce the risk of a higher peak in the overall OCR cycle. This suggests that the RBNZ is now eyeing a considerably higher peak than the 4.1% from its August projections.
- Today’s 50bp increase was widely expected, and the implicit signal of a higher OCR peak was broadly in line with what we expected. We recently revised up our OCR forecast to a peak of 4.5% by next February.