Reserve Bank of New Zealand Hikes Rates as Expected, Vows More Tightening
2022.08.17 05:49
By Ambar Warrick
Investing.com– New Zealand’s central bank hiked rates for the fourth time this year on Wednesday and vowed to keep tightening policy as it struggles to rein in rampant inflation.
The Reserve Bank of New Zealand (RBNZ) hiked rates by 50 basis points (bps) to 3.0%, bringing its benchmark rate to a seven-year high. The hike is the bank’s fourth consecutive 50 bps raise this year.
The bank said it would continue raising rates at a similar pace to control inflation, citing a labor shortage, and global economic headwinds stemming from the Russia-Ukraine war.
“The (Monetary Policy) 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 remains too high and labor resources remain scarce,” the bank said in a press release.
The New Zealand dollar strengthened 0.3% after the decision to 1.5713 to the greenback.
New Zealand’s inflation rate touched a 32-year high this year, around 7.3%, stemming from rising fuel, food, and housing costs. The figure is well above the RBNZ’s target rate of 1% to 3%.
On that front, the central bank said it plans to keep tightening monetary policy until it is able to curb spending sufficiently enough to bring inflation back within its target range.
Spending levels in the country have remained robust due to relative strength in the labor market and carried-over effects from COVID-era stimulus measures, the bank said.
The RBNZ was the first among its global peers to begin scaling back pandemic-era liquidity measures, which had seen rates drop to a record low of 0.25%. The bank had hiked rates twice in 2021, beating several of its peers to the punch.
Rising inflation is a common theme across most economies this year, which has spurred interest rate hikes across the board.
Recently, Australia’s central bank also raised rates by 50 bps, and vowed to keep tightening policy to stave off rising inflation, which is at an over 20-year high in the country.
