Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


RBNZ OCR Review - OCR raised 25bps

Data Flash (New Zealand) RBNZ OCR Review - OCR raised 25bps

Key points

As expected, the RBNZ raised the official cash rate (OCR) by 25bps to 6%, in line with average market expectations.

The rise was accompanied by a statement (reproduced in full below) which made the following key points:

The risks of rising inflation are gradually increasing.

Q4 GDP figures pointed to strong broad-based growth.

Recent indications here and abroad are that growth prospects in NZ and abroad are at least as strong as the Bank expected in March, while surplus capacity has been more or less exhausted.

Today's move is consistent with the Bank's previous projections showing that a firming in monetary conditions is necessary to maintain price stability.

Despite equity market volatility, financial markets appear to have taken the view that global growth and inflation prospects have not been materially adversely affected. The Bank will continue to monitor developments in international markets.

Even after today's rise, on most estimates interest rates remain, if anything, on the easy side of neutral. Given the weak NZD, broader monetary conditions remain very easy (see chart below).

Given evidence of strong pipeline pressures on inflation from commodity prices and the weak NZD, combined with growing pressures on inflation from excess demand in the non-tradeables sector of the economy, further tightening of monetary conditions is inevitable over the remainder of this year. We expect the Bank to raise the OCR by a further 50bps when it releases its next Monetary Policy Statement (MPS) on 17 May. We expect the OCR to rise to 7.50% by the time of the March 2001 MPS.

The May MPS is likely to show a slightly higher track for inflation and interest rates than the Bank projected in March.

Market Reaction

90 day bank bills rose 5bps on Tuesday's close to 6.52%. June and September futures rose around 10-13bps to 6.78% and 7.04% respectively. The market is currently pricing in a 38bp increase in the OCR in May.

The bond curve flattened slightly, with short bond yields rising 4bps and longer bonds rising 2bps.

The response of NZD was fairly muted: the NZD is sitting at .4957 while the TWI is at 54.77.

Darren Gibbs, Senior Economist, New Zealand, (64) 9 351 1376

This, along with an extensive range of other publications, is available on our web site

In order to read our research you will require the Adobe Acrobat Reader which can be obtained from their website for free.

For answers to your EMU questions, check Deutsche Bank's EMU web site or email our helpline

© Scoop Media

Business Headlines | Sci-Tech Headlines


Scoop 3.0: How You Can Help Scoop’s Evolution

We have big plans for 2018 as we look to expand our public interest journalism coverage, upgrade our publishing infrastructure and offer even more valuable business tools to commercial users of Scoop. More>>

Statistics: Butter At Record $5.67/Block; High Vegetable Prices

Rising dairy prices have pushed food prices up 2.7 percent in the year to October 2017, Stats NZ said today. This followed a 3.0 percent increase in the year to September 2017. More>>


Science: New Research Finds Herbicides Cause Antibiotic Resistance

New University of Canterbury research confirms that the active ingredients of the commonly used herbicides, RoundUp, Kamba and 2,4-D (glyphosate, dicamba and 2,4-D, respectively), each alone cause antibiotic resistance at concentrations well below label application rates. More>>


CO2 And Water: Fonterra's Environment Plans

Federated Farmers support Fonterra’s bold push to get to zero emissions of CO2 on the manufacturing side of the Co-operative, both in New Zealand and across its global network. More>>


Fisheries: Decision To Delay Monitoring ‘Fatally Flawed’

Conservation group representatives say a decision by the new Minister of Fisheries, Stuart Nash, to delay implementation of camera monitoring of fishing efforts in New Zealand is ‘fatally flawed’. More>>


Kaikōura Quakes: One Year On

State Highway One and the railway were blocked by damage and slips and the Inland Road suffered significant damage. Farms, homes and businesses suffered building and land damage. Power and internet went down, drinking water systems, sewage systems and local roads were all badly affected... More>>


  • Bill Bennett on Tech