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Monday, October 3, 2022

RBNZ Confident of ‘Soft Landing’ Despite Rapid Rate Hikes

RBNZ Confident of ‘Soft Landing’ Despite Rapid Rate Hikes
© Bloomberg. Pedestrians pass buildings in Auckland, New Zealand, on Monday, April 11, 2022. New Zealand’s central bank will raise interest rates for a fourth straight meeting, seeking to rein in the fastest inflation in more than 30 years even as risks of an economic downturn mount. Photographer: Fiona Goodall/Bloomberg

(Bloomberg) — New Zealand’s central bank is confident it can guide the economy to a “soft landing” even as it raises interest rates aggressively to tame inflation.

“It’s difficult to engineer a soft landing — typically a significant reduction in inflation is accompanied by negative economic growth — but there’s reasons to believe New Zealand is well placed to pull it off this time around,” Paul Conway, the Reserve Bank’s new chief economist, said in an interview Monday in Wellington. “The labor market is strong and that’s the underlying reason why the New Zealand economy is well placed to weather the storm.”

The RBNZ last week raised its official cash rate by half a percentage point for a second consecutive meeting and forecast a steeper tightening track that will take the OCR to around 4% next year. Conway said the Monetary Policy Committee didn’t seriously consider a bigger move of 75 basis points.

“75 wasn’t seriously on the table because we are pretty convinced that we can get to where we need to get with 50-point increments” he said, adding the bank was “signaling there’s probably some more 50 points coming over the next little while.”

 

©2022 Bloomberg L.P.

Source: Investing.com

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