On Wednesday, the RBNZ decided to raise interest rates as expected. The RBNZ stated that interest rates remain high for a longer period of time given the still high inflation rate. Today's forex news about the RBNZ has been summarized directly from the official Investing.com website. However, this policy is likely to have a negative impact on local economic growth due to tight monetary policy. The RBNZ has officially raised interest rates, known as the OCR, by 25 bps to 5.5%. This increase is in line with analysts' broad expectations. The move brought the OCR to its highest level since the financial crisis in 2008. The RBNZ has gradually raised interest rates by a total of 525 bps since mid-2021. While the RBNZ noted that interest rate hikes could curb spending and inflationary pressures, the central bank also expects interest rates to remain high for a longer period of time to address consumer price inflation that is outside its target range of 1% to 3%. In the first quarter of 2023, the annual consumer inflation rate reached 6.7%, which is more than double the target range set by the central bank. However, this figure is also lower than the peak inflation of more than 7% in the December quarter. Following the decision taken on Wednesday, the New Zealand dollar fell by 1%. This was due to the RBNZ meeting minutes which showed that the central bank is also considering a pause in future interest rate hikes to see the impact of tight monetary policy on the economy. In April, the RBNZ had raised its cash rate by 50 bps, a larger amount than previously expected. This move was taken in response to excessive inflationary pressures. However, in the meeting minutes, the central bank later indicated that its decision on further rate hikes would be more based on available data. The RBNZ has also warned that economic growth in New Zealand will slow in the coming quarters. Interest-sensitive sectors have seen a slowdown in demand and spending as a result of tighter monetary policy. Weak global economic conditions are expected to further hamper New Zealand's economic growth, particularly due to a slowdown in growth in the country's major trading partners, Australia and China.


However, the RBNZ noted that some aspects of the economy remain resilient. Tourism has begun to recover and is growing following the lifting of COVID-19 restrictions last year. In addition, the rebuilding effort following Cyclone Gabrielle, one of the worst storms to hit the country in more than 50 years, is also expected to stimulate economic growth. New Zealand’s labour market remains tight, with demand for labour far outstripping supply. While this trend is expected to support economic growth in the coming months, the RBNZ also indicated that it could reverse as monetary conditions tighten.

 

 Also Read : New Zealand Dollar Trades at 0.6260, Impacted by Economic Inflation

 

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