As was universally expected, the Reserve Bank of New Zealand (RBNZ) increased the OCR by a further 50 basis points to 3%. Most of the uptick in NZD/USD eased quickly after the meeting. The tone of the Statement was hawkish while acknowledging both domestic and global downside risks to growth, economists at Danske Bank report.

Hiking cycle could be extended into 2023

“Despite the weakening global growth outlook and lower oil prices, RBNZ remains worried that the persistently tight labour market will continue to support the underlying inflation pressures.”

“The policy rate path was lifted from the May meeting, now signaling that the hiking cycle could be extended into 2023 and the policy rate is also seen remaining at the high terminal level well into 2024. Consequently, the GDP forecast was lowered and unemployment rate is seen rising higher than previously.” 

“The overall tone of the decision was clearly hawkish, RBNZ remains committed to bringing inflation back to target even if it will weigh on local economic growth over the coming years.”