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New Zealand – RBNZ hike the cash rate by 0.25%, as expected

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Reserve Bank of New Zealand raises its Official Cash Rate from 0.25% to 0.5% 

 Despite the persistent Delta variant outbreak expectations were nearly unanimous the Bank would hike. 

Headlines via Reuters from the statement:

  • monetary stimulus further reduced
  • says appropriate to continue reducing the level of monetary stimulus
  •  further removal of monetary policy stimulus is expected over time
  • cost pressures are becoming
    more persistent
  •  current covid-19-related
    restrictions have not materially changed the medium-term outlook for
    inflation and employment
  • capacity pressures remain
    evident in the economy
  • economic activity will recover
    quickly as alert level restrictions ease
  • headline cpi inflation is
    expected to increase above 4 percent in the near term
  • says inflation to return towards 2
    percent midpoint over the medium term

And, from the Minutes to the meeting, Headlines via Reuters: 

  •   committee noted that further removal of monetary policy stimulus is
    expected over time
  •  future moves contingent on
    the medium-term outlook for inflation and employment.
  • policy stimulus will need
    to be reduced to maintain price stability and maximum sustainable
    employment over the medium term.
  • demand shortfalls are less
    of an issue than the economy hitting capacity constraints
  • number of factors are
    expected to constrain house prices over the medium term
  • committee will be watching
    closely how the economy adjusts to the ongoing disruption from
    endemic covid-19
  • early data suggest that
    business and consumer confidence remained robust during the latest
    lockdown

Background (previews)

In August the RBNZ held the cash rate unchanged despite expectations in the weeks and days leading up to the meeting for a hike. Hike expectations were slashed just hours ahead of the August meeting due to the latest COVID-19 outbreak … that has not gone away. 

There is no press conference scheduled for Governor Orr today:



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