PRCBroker：RBNZ Review: Suggests Further Rate Hikes
2022-08-22
■ RBNZ decided to raise interest rates for the 7th consecutive meeting, raising the policy interest rate to 3.00%, the level for the first time in about 7 years.
■ It has clarified its stance of raising interest rates to a level above 4%, placing top priority on curbing inflation.
This article summarizes the Bank of New Zealand (NZ) (RBNZ) monetary policy meeting on 17 August. As expected by the market, the RBNZ decided to raise interest rates seven times in a row, and the policy rate (OCR, the official cash rate) was raised from 2.50% to 3.00%. The 50 basis point rate hike was the fourth in a row and sent the OCR to its highest level since July 2015.
Also, in a statement released after the policy meeting, the Reserve Bank of New Zealand hinted at further sharp rate hikes in the future. The OCR outlook has been revised from the previous July forecast（from 3.4% at the end of 2022 to 3.7%, at the end of 2023 from 3.9% to 4.1%）.In addition, to keep the inflation rate within the target range of 1-3% year-on-year, the final interest rate (the end of the rate hike) was set at 4.1% from the April-June quarter. In the April-June quarter of 2023-2024, The meeting also said it would maintain the policy outlined above. Since October, the policy guidance will be more aggressive than expected to raise interest rates, and the interest rate futures market will price in， the OCR will be raised to 4.00% by April next year.
On the other hand, consumer spending will be sluggish starting in the April-June quarter of this year due to soaring prices and rising interest rates, also raising concerns, as shown in PRESTIA Insight*1 published on August 16. First, the focus is on whether New Zealand's April-June real GDP will return to positive growth compared to the previous quarter, due on September 15. The Reserve Bank of New Zealand said in a statement that it expects house prices to fall by about 20% by the middle of next year. But high levels of employment, savings accumulated during the lockdown, and government subsidy payments have all boosted confidence in the household sector. However, the monetary policy statement predicts that the growth rate in the April-June quarter of next year will fall back to the same level as the previous quarter, and the need for a tough monetary policy has not changed.
In this case, New Zealand's representative stock index, the NZX50, did not show significant strength compared to other countries. The index reversed in mid-June and recovered to its highest level since early May. However, as of Aug. 18, the index's year-to-date rate of change was -9.3%, roughly in line with the price action of the S&P 500 (-10.1%) and the Stoxx Europe 600 (-9.6%).
*1: PRESTIA Insight 2022.08.16 "RBNZ Preview: 50bps interest rate hike for 4 consecutive meetings"