New Zealand's central bank delivered its sixth straight interest rate hike on Wednesday and signaled it remained comfortable with its planned aggressive tightening path as authorities seek to reduce second-round effects of runaway inflation.
The Reserve Bank of New Zealand (RBNZ) raised the official cash rate by 50 basis points to 2.5%, a level not seen since March 2016. Continued tightening at pace to maintain price stability and support maximum sustainable employment was appropriate, it said.
Nearly all economists polled had expected the central bank to hike the cash rate by 50 basis points. Yet there had been speculation it might soften its hawkish outlook, given alarming falls in business and consumer confidence and an accelerating slide in national house prices.
But the RBNZ said in its statement that it's policy-setting committee was also "broadly comfortable" with the aggressive policy path projected in May, which saw interest rates nearing 3.5% by the end of this year and peaking around 4% in mid-2023.
However, it added that the committee acknowledged there was near-term upside risk to consumer price inflation and emerging medium-term downside risks to economic activity.
Following the broadly neutral statement, the New Zealand dollar fell 0.3%.
ASB Bank said in a note that the central bank's viewpoint did not seem to have shifted much since its May meeting.
"While it acknowledged the downside risk facing the growth outlook, it is continuing to roll out the tough-talking language about cooling demand and getting inflation under control," ASB noted.
A front-runner in withdrawing pandemic-era stimulus among its peers, the RBNZ has moved hawkishly to curb the highest inflation in three decades, at 6.9%. The cash rate is now up tenfold from a record low of 0.25% in October.