The Reserve Bank of New Zealand (RBNZ) is likely to bring a halt to its tightening cycle once the Official Cash Rate (OCR) hits 2.5%, MNI reports, citing comments by Jarrod Kerr, a member of the shadow RBNZ board created by economic think tank the NZ Institute of Economic Research (NZIER).
Key quotes
“The central bank could stop raising interest rates when they reach 2.5%, and not go beyond 3% as forecast by the latest guidance as it manages a potential tricky balance of a weaker economy and energy-driven inflation.”
“It is possible that a correction in the housing market combined with higher inflation due to energy prices could cool the NZ economy faster than expected, and higher interest rates may not be appropriate.”
"I just think they need to keep delivering on what they said they were going to do, and do 25 basis points each time.”
"By the end of the year we are going to find ourselves in a situation where the housing market is correcting and as fuel prices increase it is going to be interesting to see how discretionary spending holds up. I think the RBNZ will stop at 3%, and if things deteriorate faster, they might stop at 2.5%."
Market reaction
NZD/USD was last seen down 0.12% on the day at 0.6855, undermined by the Russia-Ukraine turmoil-led risk-aversion. The kiwi traders seem to take the above comments with a pinch of salt.