New Zealand: RBNZ hikes the OCR to 2.50% in July – UOB

Economist at UOB Group Lee Sue Ann comments on the recent RBNZ event.

Key Takeaways

“The Reserve Bank of New Zealand (RBNZ) decided to raise its official cash rate (OCR) by 50bps to 2.50%. Today’s decision was an interim review rather than a quarterly Monetary Policy Statement (MPS), so no new forecasts were issued and there was no press conference by RBNZ Governor Adrian Orr.”

“We had previously expected the RBNZ to tune back to the more usual pace of 25bps hikes from Jul onwards. Today’s 50bps move to a 2.50% policy rate would make the RBNZ ahead of most other central banks in lifting borrowing costs to combat rising inflation, but also seen taking the benchmark rate above a neutral level, which it deems to be 2%.”

“It is now looking likely that the RBNZ may hike by 50bps at the Aug and Oct meetings, after which we think it will tune back to the more usual pace of 25bps hikes. We will, however, be finalising our OCR forecasts only following the CPI release.”