The Reserve Bank of New Zealand (RBNZ) yesterday raised its key interest rate by another half-percentage point and sees it climbing to at least 4 percent, cementing its place at the forefront of global tightening.
The bank’s Monetary Policy Committee lifted the official cash rate (OCR) to 3 percent as expected, while increasing and bringing forward its forecast rate peak.
“RBNZ communication today was strikingly hawkish,” said Andrew Ticehurst, senior economist and rates strategist at Nomura Holdings Inc. “Many market participants appear to have been on the look-out for a potential dovish pivot today” and had to adjust.
Photo: AP / New Zealand Herald
New Zealand policymakers are trying to strike the same balance as their US Federal Reserve counterparts: rein in the fastest inflation in more than a generation without cratering the economy. While unemployment has edged up and house prices are falling, consumption is holding up and supporting growth.
New Zealand’s 2.75 percentage points of hikes in the past 10 months are the most aggressive tightening cycle it has delivered since pioneering inflation targeting more than 30 years ago. It currently exceeds the Fed and Bank of Canada’s 2.25 points.
“Our view is that sitting around that 4 percent official cash rate level buys the Monetary Policy Committee right now significant comfort that we would have done enough to see inflation back to our remit,” RBNZ Governor Adrian Orr told reporters after the decision, referring to the central bank’s 1 to 3 percent target.
The RBNZ’s updated forecasts yesterday showed the OCR peaking at 4.1 percent in the second quarter of next year versus a May estimate of 3.95 percent in the third quarter of that year. The new track shows the OCR gradually declining from 2024.
“The committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment,” the RBNZ said in a statement. “Core consumer price inflation remains too high and labor resources remain scarce.”
New Zealand’s inflation is running at 7.3 percent, the fastest pace in 32 years. The central bank predicted it would slow to 5.8 percent by the end of this year — higher than the 5.5 percent seen in May.
Inflation would ease to 3.8 percent by the end of next year and would not return to the midpoint of the target until the middle of 2024, it said.
Meanwhile, wages are rising at the fastest pace since 2008 and set to further accelerate as firms struggle to secure labor.
The bank projects annual average economic growth of 2.8 percent in the year through March next year, slowing to 0.8 percent in the 12 months through March 2024. Previously, it saw 2023-2024 growth of 1.3 percent.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure