Economist at UOB Group Lee Sue Ann reviews the latest interest rate decision by the RBNZ.

Key Takeaways

“As expected, the Reserve Bank of New Zealand (RBNZ) decided to raise its official cash rate (OCR) by 50bps again to 3.50%. This is the fifth consecutive month that the RBNZ has raised rates by 50bps.”

“We see the RBNZ on track to continue hiking the OCR to 4.00% by the end of this year, as per our forecasts. Thereafter, we see the RBNZ on hold, as we are mindful that it will not want the economy to tip over into recession and for unemployment to rise sharply, as it aims to strike a balance with higher interest rates slowing the economy and inflation. House prices are plunging at a fast pace.”

“Risks, however, remain skewed towards more rate hikes in 1Q23, and thus an OCR higher than 4%, before the RBNZ pauses in the current tightening cycle. We will be monitoring both local and global developments and reviewing our OCR trajectory if necessary. The next RBNZ meeting is on 23 Nov, and this will also be the last monetary policy meeting for 2022.”