RBNZ Review

■ The Reserve Bank of New Zealand (RBNZ) unanimously decided to raise the Official Cash Rate (OCR) to 2.50% and hinted at the possibility of further rate hikes in the future.  

■ The New Zealand dollar has rebounded from its lows in late June. Still, given the risk of high inflation dragging down economic growth, the trend is expected to remain limited to a rebound phase, with little likelihood of forming a sustained upward trend. 
 
On the 8th, the Reserve Bank of New Zealand (RBNZ) unanimously decided at its Monetary Policy Committee meeting to raise the Official Cash Rate (OCR) by 0.25 percentage points to 2.50%, the first rate hike since April 2023. The policy statement pointed out that with the significant decline in international oil prices following the partial reopening of the Strait of Hormuz, short-term inflationary pressures have eased somewhat. However, the RBNZ also expressed concern that if the New Zealand dollar continues to depreciate, medium-term inflationary pressures may rise further. Furthermore, given that the current inflation rate remains above the target level and economic activity is expected to remain robust, further tapering of accommodative monetary policy may be necessary in the future to bring inflation back to the RBNZ's target midpoint of 2.0%. The Fed also stated that future policy decisions will depend on the latest economic data, corporate pricing behavior, and the impact of the strength of economic activity on medium-term inflationary pressures. 

 
RBNZ's Monetary Policy Review (MPR), released simultaneously, projects that the Consumer Price Index (CPI) will peak at 3.9% year-on-year in the April-June quarter, before slowing to 3.3% in the July-September quarter. This inflation forecast is lower than the May forecast because the recent decline in international oil prices has directly weakened the impact of rising energy prices, and the transmission effect on other commodity prices has also weakened. However, the 3.1% year-on-year CPI increase in the January-March quarter is still above the Fed's target range of 1%-3%. The April-June CPI, expected to be released on the 21st, may see a further acceleration in year-on-year growth due to the previous rise in oil prices. 
 
Short-term interest rate markets show that market expectations for another 0.25 percentage point rate hike at the next monetary policy meeting on September 2nd have risen to over 72%. Amid rising expectations of interest rate hikes, the New Zealand dollar has rebounded after hitting lows of US$0.5625 and Japanese yen 91.00 on June 26. However, given the downward pressure on economic growth from high inflation, the New Zealand dollar is expected to remain in a "rebound rather than a reversal" trend in the short term.