Economist at UOB Group Lee Sue Ann reviews the latest RBNZ event, where the central bank hiked the OCR to 0.75%.
“The Reserve Bank of New Zealand (RBNZ), at its last meeting of the year, decided to increase the Official Cash Rate (OCR) to 0.75%. In the accompanying press release, the RBNZ stated that ‘the Committee agreed it remains appropriate to continue reducing monetary stimulus so as to maintain price stability and support maximum sustainable employment’, adding that ‘further removal of monetary policy stimulus is expected over time given the medium-term outlook for inflation and employment’.
“Today’s hike of 25bps reinforces our view that any further tightening is likely to occur in a steady approach, with incoming data key to determining future moves. The RBNZ now expects to raise its benchmark rate to 2.50% by the third quarter of 2023, according to the latest monetary policy statement (November 2021). Previously, it projected the cash rate plateauing at around 2.00% from late 2023. For now, we are comfortable with our call for follow-up 25bps hikes in February, May, August and November, taking the OCR to 1.25% by mid-2022, and for it to reach 1.75% by end-2022.”