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RBNZ raises rate track, signaling additional rate hike

RBNZ decided to keep the Official Cash Rate steady at 5.50%, aligning with market expectations. However, a significant aspect of their announcement is the upward revision of their “rate track.”

According to the bank’s forecasts in the Monetary Policy Statement, OCR is expected to peak at 5.70% in Q2 of 2024 and maintain this level throughout the year. Looking ahead, RBNZ anticipates a rate cut in Q2 of 2025, bringing it down to 5.4%.

In the accompanying statement, RBNZ noted, “ongoing excess demand and inflationary pressures are of concern, given the elevated level of core inflation.”

RBNZ also emphasized its readiness to hike again. “If inflationary pressures were to be stronger than anticipated, the OCR would likely need to increase further.”

Moreover, RBNZ underlined the necessity of maintaining interest rates at a restrictive level for a sustained period, aiming at ensuring consumer price inflation returns to target level and to support maximum sustainable employment.

Full RBNZ statement and MPS here.

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