RBNZ shadow board members differ in views on the extent of interest rate increases
|The Reserve Bank of New Zealand will be a major feature of forex markets this week and ''there is a wide range of views within the Shadow Board over how much the Reserve Bank should increase interest rates, particularly for the coming year. The majority view amongst Shadow Board members was that the Official Cash Rate (OCR) should be increased by 50 basis points at the May meeting. However, there was a divergence in views on how much the OCR should be increased beyond the May meeting. This wide range of views reflects both different concerns held by the Shadow Board members compounded by the large degree of uncertainty over the economic outlook over the coming year.''
Analysts at TD Securities explained that the ''both Consumer Price Index inflation (6.9% YoY) and sectoral core inflation (4.2% YoY) were elevated in the first quarter and hint at the urgency needed from the RBNZ to constraint inflation expectations. The Bank seems content with its 'stitch in time' approach to policy and didn’t push back on market pricing which leads us to conclude that the Bank will go ahead with another 50bps hike.''
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