a quarter percentage point to 0.5 per cent and signalled further tightening in response to a red-hot economy. Although this was the Reserve Bank’s first such move in seven years, it was widely anticipated, by analysts, with ANZ’s Chief Economist in New Zealand, Sharon Zollner, noting that a rate hike could have been avoided only if “the Earth was hit by a meteorite”.
She pointed out that if the central bank continued to maintain the OCR at 0.25 per cent, markets would have most likely abandoned expectations of future increases and accused the Reserve Bank of “crying wolf”.
Following the announcement of the rate increase, the apex bank confirmed its intention to continue to further increase interest rates with the aim of reducing the level of monetary stimulus. “The committee noted that further removal of monetary policy stimulus is expected over time, with future moves contingent on the medium-term outlook for inflation and employment,” RBNZ’s statement read.
Analysts project the OCR to progressively increase over the next couple of years to 2.25 per cent by mid-2023.
