Beautifully Weighted, Evenly Balanced. RBNZ Not Predicting Future Moves Early

• Earlier today the RBNZ’s Monetary Policy Committee once again delivered a predictable and welcome hold “with full consensus” on the OCR. With the 2.25% OCR staying put for the next six weeks, all eyes will be on the Middle East and the worsening fuel crisis. Weighing up the pros and cons of any future moves, the RBNZ is showing both hawk or dove feather in our view.
• But weeks feel like an eternity when the war in the Middle East wages on and oil prices are creeping higher and lower and higher again. Price is only the first and glancing blow to our economy compared to the true knock out punch that would come from a domestic shortage. Especially of diesel.
• In our view, any rise in the costs of essentials will feed into inflation growth in the short term, but cost increases in non-essentials will push demand down and put down-ward pressure on growth. In short, the inflation pressures from essentials is another kick in the guts to Kiwi businesses and consumers already weighted down by cost-of-living pressures.

The RBNZ has once again delivered a predictable and welcome hold “with full consensus” on the OCR. With the 2.25% OCR staying put for the next six weeks, all eyes will be on the Middle East and the worsening fuel crisis. Weighing up the pros and cons of any future moves, the RBNZ is showing both hawk or dove feather in our view. They don’t feel pressured to pick a move too early, and we agree.

We expected this ice-cold hold as Governor Anna Breman foreshadowed two weeks ago in her speech to the Business NZ CEO Forum. But two weeks is an eternity when the war in the Middle East wages on and oil prices are creeping higher and lower and higher again. Price is only the first and glancing blow to our economy compared to the true knock out punch that would come from a domestic shortage. Especially of diesel.

Take Covid and flip it on its head. The Kiwi economy runs low on diesel, our emergency services and key industries would be the first to shut down. If you’re fuelling up your regular petrol car and feeling bad for yourself (fair enough, same here), spare a thought for Kiwi farmers and logistics operators. The price of Unleaded 91 is up 25% in the last 28 days (according to gaspy), that hurts, but it doesn’t even hold a candle to the 64% increase in the cost of Diesel over the same period.

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