BNZ's take on the larger-than-expected +50bp cash rate target hike from the Reserve Bank of New Zealand:
- Following the recent fall in swap rates, the Bank appeared keen to prevent lending rates doing the same, and thereby opted for the larger hike, with the committee not yet confident that the level of rates was sufficient to bring inflation back into the 1-3% target range.
- Despite the chance that the economy might already be in recession, the commentary on the economy read hawkish, with talk of demand continuing to outpace supply, the “strong” labour market, and near-term inflationary pressures having increased, boosted by recent severe weather events.
- The Statement didn’t give any clarity on the RBNZ’s next move, with its comment that the extent of the expected moderation in domestic demand, core inflation and inflation expectations “will determine the direction of future monetary policy”. While a strict read of that comment raised the question of whether the next move could be an easing, reading the totality of the minutes certainly didn’t imply that and the market consensus quickly shifted to the Bank’s February projection of a 5.5% peak OCR, which would be achieved by a 25bps hike next month.
The next RBNZ policy meeting is May 24, as seen above.
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Yesterday from the Bank, ICYMI:
