RBNZ raise cash interest rate target by +75bp to 4.25%, as widely expected

Reserve Bank of New Zealand updated forecasts for the path ahead, see the:

• official cash rate at 4.57% in March 2023 (previously at 4.03%)
• official cash rate at 5.5% in December 2023 (previously at 4.1%)
• twi nzd at around 70.0% in December 2023 (previously at 71.7%)
• annual cpi 5.0% by December 2023 (previously at 3.8%)
• official cash rate at 5.5% in march 2024 (previously at 4.09%)
• official cash rate at 4.35% in December 2025

More:

• Monetary conditions need to tighten further
• Remains resolute in achieving monetary policy remit
• Productive capacity of the economy is being constrained by broad-based labour shortages, and wage pressures are evident
• Core consumer price inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term is too high, employment is beyond its maximum sustainable level,
• Household spending remains resilient
• Employment levels are high, and income growth and household savings are supporting spending
• Committee agreed that the OCR needs to reach a higher level, and sooner than previously indicated,
• Aggregate demand continues to outstrip New Zealand's capacity to supply goods and services
• Near-term inflation expectations have risen.
• A range of indicators continue to signify broad-based inflation pressure

From the Minutes:

• Committee gave consideration to an increase in the ocr of 75 or 100 basis points
• Members agreed that a larger increase in the ocr was appropriate
• Members agreed ocr needed to reach a level where it was confident it would reduce actual inflation to within the target range
• Members agreed that this level had increased since the time of the august statement
• Committee agreed that the level of settlement cash balances is not a source of unexpected inflationary pressure
• Members viewed the risks to inflation pressure from fiscal policies as skewed to the upside

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Background to this is here:

• Reserve Bank of New Zealand meet Wednesday - preview

• RBNZ +50 or +75 cash rate hike this week - the larger one would prop up the kiwi $

• RBNZ Shadow Board majority view is for a +75bp interest rate hike (cash rate to 4.25%)
• RBNZ meet next week - preview - "likely to deliver an outsized 75bps hike to 4.25%"
• Poll shows most analysts expect a +75bp rate hike from the RBNZ next week