The Reserve Bank of New Zealand (RBNZ), raised borrowing costs by 0.5%, the highest rate in 14 years. The RBNZ’s board said that monetary conditions must be tightened more as inflation remains too high. The board anticipates that headline inflation will drop to 4.2% in March 2024. The RBNZ’s decision boosted the New Zealand dollar (NZD) against other major currencies.
Investors and traders will focus on minutes of the Federal Open Market Committee’s (FOMC), which are due to be published later today. Market participants will seek comments about the possibility of the Federal Reserve’s (Fed), going back to 50-bps hikes.
RBNZ raises Official Cash Rate 50 bps
The RBNZ’s board announced its decision to hike its benchmark interest rate by 50 basis points, reaching 4.75%. The decision was in line with analysts’ expectations. The RBNZ’s accompanying report said that 50 and 75 bps increases were discussed during the meeting, adding that the bank expects the cash rate to peak at 5.5%.
The RBNZ’s Governor Andrew Orr noted that the board still predicts a recession over a 9-12 month period and stressed that it would be too early to determine the impact of Cyclone Gabrielle on the country’s economy. RBNZ’s Chief…
