The New Zealand Institute of Economic Research (NZIER, the Shadow Board, recommended that the Reserve Bank of New Zealand (RBNZ) should hike the OCR by 50 basis points in August and follow up with further tightening.
Key takeaways
The majority view was that a 50 basis points OCR increase in the August meeting is warranted, with only two members recommending a different quantum of tightening (25 basis points and 75 basis points each).
Shadow Board members highlighted the strong inflation pressures in the New Zealand economy as justification for their recommendation for further tightening over the coming year.
Regarding where the OCR should be in a year, Shadow Board members’ views ranged from 3 percent to 4.25 percent.
Signs of slowing in parts of the New Zealand economy highlight the balancing act faced by the Reserve Bank in controlling inflation in the current supply-constrained environment.
Market reaction
NZD/USD remains pressured near-daily lows of 0.6446, at the time of writing, down 0.09% on the day. Looming US-China risks over Taiwan remain a major concern for the market at the start of the week.
