Highlights of the statement from RBNZ Governor Wheeler.
- Rate hike was forecast by all 15 economists surveyed by Bloomberg
- There was some speculation about a 50 bps hike
- Wheeler sees key rate rising about 200 bps in two years
- The Bank does not believe the current level of the exchange rate is sustainable in the long run.
- Inflationary pressures increasing
- Economic expansion has ‘considerable momentum’
- GDP is estimated to have grown by 3.3 percent in the year to March
- Full statement
Key part of the statement:
While headline inflation has been moderate, inflationary pressures are increasing and are expected to continue doing so over the next two years. In this environment it is important that inflation expectations remain contained. To achieve this it is necessary to raise interest rates towards a level at which they are no longer adding to demand. The Bank is commencing this adjustment today. The speed and extent to which the OCR will be raised will depend on economic data and our continuing assessment of emerging inflationary pressures.
Reading the statement is like a trip back to the pre-crisis era. The RBNZ jawboning is no match for commentary about rising inflation, economic expansion and forecast rate hikes. Tough to slow down NZD.
