RBNZ Raises Cash Rate, Forecasts Higher Peak

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by Stephen Wright

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WELLINGTON, New Zealand – The Reserve Bank of New Zealand raised its benchmark interest rate by 50 basis points for the second consecutive meeting and predicted a higher peak for interest rates as central banks try to suppress inflation globally.

The RBNZ rate hike on Wednesday raised the cash rate from 1.5% to 2.0%, following an increase of the same size in April.

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The central bank has projected it to reach 3.4% by the end of this year and 3.9% in the April-June quarter of 2023. Earlier it had forecast the cash rate to reach 2.2% and peak in the last quarter of this year. Around 3.4% in 2024.

“The Monetary Policy Committee agrees that stabilizing inflation is a priority for it,” RBNZ said in a summary of the minutes of the meeting.

“Members agreed that maximizing the OCR (official cash rate) was consistent with avoiding higher future costs for employment as a result of higher inflation and for the economy in general,” the statement said.

The central bank began raising interest rates in October last year, nearly 18 months after keeping its cash rate at a record low of 0.25% in response to the Covid-19 pandemic.
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The RBNZ is undergoing its most aggressive tightening cycle in a generation, reflecting the challenges brought on by broad monetary and fiscal stimulus, global supply chains and higher prices for energy and other commodities following Russia’s invasion of Ukraine.

New Zealand consumer prices rose 6.9% in the January-March quarter compared to a year ago, the biggest increase in three decades.

Write to Stephen Wright at [email protected]

Credit: www.marketwatch.com /

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