New Zealand’s central bank will raise key interest rates to 5.5% but hints that the move will be cut

New Zealand’s central bank has raised its interest rate to 5.5% but signaled that the move will be reduced, triggering a selloff.

AuthorNICK PERRY Associated Press

FILE – Reserve Bank of New Zealand Governor Adrian Orr speaks to reporters in Wellington, New Zealand on May 8, 2019. New Zealand’s central bank raised its key interest rate on Wednesday, May 24, 2023, to 5.5% but signaled a local move. to be cut off, to start trading in cash. (AP Photo Nick Perry, File)

The Associated Press

WELLINGTON, New Zealand — New Zealand’s central bank raised its benchmark interest rate on Wednesday to 5.5% but signaled that the move would be reduced, triggering a sell-off.

Wednesday’s quarterly hike was the 12th straight increase by the Reserve Bank of New Zealand since October 2021. But for the first time since the tightening began, the bank has decided that the next move will be a cut, which could come later. next year.

The estimate was tougher than market expectations and sent the New Zealand dollar down 1% to trade at 62 US cents.

Like many central banks around the world, the Reserve Bank of New Zealand has been raising rates to combat inflation, which in New Zealand has fallen from a recent peak of 7.3% last June to 6.7%.

This is still above the bank’s interest rate of around 2%.

New Zealand’s unemployment rate remains low at 3.4%, supporting rising wages and rising prices.

The central bank’s monetary policy committee said global economic growth is slowing and inflationary pressures are easing.

“Consumer investment growth has slowed and housing activity has slowed, while house prices have returned to stable values,” the committee said. “In many cases, businesses are showing a slow demand for their goods and services, as well as weak business goals.”

The committee said migration The increase since the lifting of the COVID-19 restrictions is expected to decrease. The bank said that doing so has helped to reduce unemployment but the effect on spending is not known.

A summary of the committee’s meeting showed that some members favor the benchmark rate to be at 5.25%. The upward decision was made by a vote of 5-2, out of unanimous decisions.

The demand price remains at the highest level since the global financial crisis in 2008.

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