The Reserve Bank of New Zealand has increased its policy rate by 0.50% to 4.75% at a meeting held on Tuesday, Feb 22. This marks the highest level in more than 14 years, as the central bank seeks to bolster confidence that inflation numbers will fall within the mid-term target range.
The move was expected by most analysts, as the Reserve Bank of New Zealand has been on a tightening monetary policy path since October 2021. This latest rate hike marks the 10th consecutive increase by the central bank.
The Monetary Policy Committee (MPS) of the Reserve Bank of New Zealand has indicated that it is likely to raise the policy rate up to a maximum of 5.5% this year. The increase is part of the bank’s efforts to curb inflation, which has been rising faster than expected, driven by supply chain issues and other pandemic-related factors.
The Reserve Bank of New Zealand has highlighted that despite the recent surge in COVID-19 cases, the country’s economy remains resilient, with strong growth and low unemployment. However, the bank has also cautioned that the global economic environment remains uncertain, with ongoing concerns around the spread of the Omicron variant and potential supply chain disruptions.
The Reserve Bank of New Zealand’s decision to raise interest rates is expected to have an impact on borrowing costs, including mortgages, and could potentially lead to a slowdown in the housing market. However, the bank has emphasized that it is taking a gradual approach to monetary tightening, to ensure a sustainable and balanced economic recovery.
Overall, the Reserve Bank of New Zealand’s decision to raise interest rates by 0.50% was in line with market expectations, and signals the bank’s commitment to maintaining price stability and supporting sustainable economic growth.