New Zealand Interest Rate Increase

Reserve Bank of New Zealand Today it raised the main interest rate by 0,5 percentage points to the level of 3%, which was last in force seven years ago. It was the fourth increase by 50 basis points in the current cycle.

Inflation in New Zealand is rising all the time

In Q6,9 this year. inflation in New Zealand increased from 7,3 percent to 22 percent. (on an annual basis). This is the highest level of price dynamics in 2024 years. To contain the pace of inflation, the Reserve Bank of New Zealand raises interest rates. Today's rate hike was in line with the market consensus. Some policymakers believe that inflation may soon begin to stabilize or even start to fall due to lower fuel and transport prices. Nevertheless, inflation may not return to the New Zealand central bank's target until mid-XNUMX.

Thus, further tightening of the monetary policy may be required, and its end is expected in the first quarter of 2023, according to the statement issued to today's decision. As a result, the New Zealand central bank may raise the main interest rate by about 3,75 percentage points throughout the cycle, to the region of 4 percent. from the record low of 0,25% in 2021.

Exchange rate NZD / USD seemed to react relatively calmly to today's rate hike as it was in line with market consensus. Since the beginning of the month, the NZD has gained 1,10% to USD, which could make New Zealand the strongest of the world's major currencies.