Tag: RBNZ

The Reserve Bank Of New Zealand Inflicts More Interest Rate Pain!

The RBNZ Monetary Policy Committee voted to raise the Official Cash Rate (OCR) from 5.25% to 5.50%.

They said:

The combination of weaker demand and improved supply has reduced inflation in New Zealand. Annual consumers price inflation declined from 7.2% in the December 2022 quarter to 6.7% in the March 2023 quarter. Prices for some goods and services that change a lot — such as petrol prices and airfares — have also declined.

Inflation declined by more than expected, but it remains too high. While many measures of inflation expectations have declined in the last 3 months, they remain elevated. Most measures of persistent or ‘core’ inflation have stayed near recent peaks. Inflation is expected to take some time to return to the mid-point of the MPC’s 1 to 3% target range.

Inflationary pressure continues to be supported by a tight labour market, with employment above its maximum sustainable level. The unemployment rate remained very low at 3.4% in the March 2023 quarter. Although most indicators show that labour market pressures have eased since last year, they remain strong.

Overall, high interest rates are still needed to further slow demand. This will help to reduce upward pressure on prices, leading to lower headline inflation.

http://www.martinnorth.com/

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The New Zealand Hawk Stands Alone…

A significant gulf has opened up between New Zealand and Australia in terms of monetary policy, after RBNZ lifted another 50 basis points, while Australia held. Underlying this are a series of conflicting assumptions about how the economies will fare – but the risk of recession in New Zealand is now highly likely – some would say certain; while in Australia, the protection of the housing market appears to be front of mind, with the RBA willing to let inflation burn hotter for longer. Both cannot be right!

New Zealand’s Central Bank Lifts Interest Rates by 0.5%!

Adrian Orr, RBNZ Governor said they were listing the Official Cash Rate by 0.5% today, with a peak of 5.5% still on the cards. The recent Cyclone may also add additional inflationary pressure.

He also highlighted the importance of cash – and branches – at a time of crisis, like when the power goes out. And the risks to social cohesion when this is ignored. Just wow!

http://www.martinnorth.com/

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More Aggressive Rate Tightening Says RBNZ As Rates Rise to 2%!

Rates were lifted today in New Zealand as the Reserve Banks tries to tame inflation. But will they break something as pressures on households rise?

https://www.rbnz.govt.nz/news/2022/05/monetary-conditions-tighten-by-more-and-sooner

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Half A Percent Cash Rate Rise Drives Another Nail into New Zealand Property Falls

The New Zealand Reserve Bank’s Monetary Policy Committee dropped a 50 basis point hike today by lifting the official cash rate to 1.5% from 1% Wednesday in Wellington, the first time it has delivered an increase of that magnitude since 2000, its biggest hike in 22 years.

So the question is, does the 50 basis point hike represent a stitch in time, or a nail in the coffin of the property market?

The move wrong-footed 15 of 20 economists who expected a quarter-point adjustment. However, investors had assigned it a 70% probability.

“The Committee agreed that their policy ‘path of least regret’ is to increase the OCR by more now, rather than later, to head off rising inflation expectations,” the RBNZ said. “It is appropriate to continue to tighten monetary conditions at pace.”

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Will Banks Be Stressed Too?

We just got the results of the Reserve Bank New Zealand Stress Tests, and this year the RBNZ undertook both its regular solvency stress test, challenging the resilience of banks’ capital to a severe downturn, and also put the spotlight on banks’ liquidity and funding resilience through a liquidity stress test ahead of next year’s review of the RBNZ’s liquidity policy. The solvency stress test included the five largest banks – ANZ NZ, ASB, BNZ Westpac and Kiwibank – and the liquidity stress test featured those five plus Co-operative Bank, Rabobank NZ, Heartland, SBS and TSB.

https://www.rbnz.govt.nz/news/2021/12/stress-tests-show-strengthening-bank-resilience

Large banks fared worse than the smaller banks. However, banks were able to identify actions that, if effective, would considerably improve the outcome.

Now the banks is at pains to highlight the stress test scenarios are hypothetical and don’t represent its view of the most likely future path for financial stability risks. And the RBNZ doesn’t release individual banks’ stress test results. Unlike the results from the Federal Reserve in the US, where individual banks results are disclosed. In this respect New Zealand is following the opaque strategy APRA also executes, which is a pity. Not least because in New Zealand, Bank Deposit Bail-In is a thing via the Open Banking Resolution, and the RBNZ has warned people to do due diligence on the individual banks – so why don’t they disclose the detail we ask?

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The Ups And Downs Of Future Rates – The DFA Daily 23rd February 2021

The latest edition of our finance and property news digest with a distinctively Australian flavour.

CONTENTS
0:00 Introduction
1:09 Westpac Says Home Prices Will Grow
3:30 Rising Yields A Risk
7:36 NAB Cuts Mortgage Rates
9:39 NAB;s Troubles Loans
10:40 ME Bank Sold To Bank Of Queensland
13:31 NZ Cash Rate May Rise – Soon
17:22 Conclusions

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