New Zealand Dollar Surges Against US Dollar, Australian Dollar After RBNZ Delivers 50-Basis Point Rate Hike

The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment. Core consumer price inflation is too high and labour resources are scarce. Global consumer price pressures remain heightened. The global demand for goods and services is exceeding supply capacity, putting upward pressure on prices. Food and energy prices are being particularly exacerbated by the war in Ukraine. A recent decline in oil prices and an easing in some supply-chain constraints have seen headline inflation measures fall in some countries. However, core measures of inflation have risen and persist. Central banks are tightening monetary conditions, implying a weaker growth outlook for New Zealand’s trading partners. In New Zealand, the level of domestic spending has remained resilient to date, in the face of slowing global growth and higher domestic interest rates. Employment levels are high, and household balance sheets remain resilient despite the fall in house prices. New Zealand’s productive capacity is still being constrained by labour shortages and wage pressures are heightened. Overall, spending continues to outstrip the capacity to supply goods and services, with a range of indicators continuing to highlight broad-based pricing pressures. Committee members agreed that monetary conditions needed to continue tweet at 9:01pm: ?*RBNZ: MONETARY CONDITIONS NEEDED TO CONTINUE TO TIGHTEN *RBNZ: CORE CONSUMER PRICE INFLATION IS TOO HIGH *RBNZ: COMMITTEE CONSIDERED 50, 75 BPS RATE RISE AT THIS MEETING tweet at 9:02pm: RBNZ: THE LEVEL OF DOMESTIC SPENDING HAS REMAINED RESILIENT TO DATE, RBNZ MINUTES: SOME MEMBERS HIGHLIGHTED THAT A LARGER INCREASE IN THE OCR NOW WOULD REDUCE THE LIKELIHOOD OF A HIGHER PEAK IN THE OCR BEING REQUIREDReserve Bank hikes official cash rate to 3.5% The Reserve Bank has raised the official cash rate by 50 basis points to 3.5%, in line with the expectations of economic forecasters. The rate hike is the sixth this year and its fifth consecutive 50bp rise. The rate rise comes amid a growing schism between economists who argue central banks need to keep aggressively raising interest rates to be sure of quickly conquering inflation, and those counselling more caution in light of the time lag involved in monetary policy and growing fears of a world recession. The Reserve Bank of Australia surprised analysts on Tuesday by only raising its official cash rate by 25bp to 2.6%, with its governor, Philip Lowe, noting its cash rate had “increased substantially in a short period of time” and explaining it was assessing the outlook for inflation and economic growth.