Kiwis Get Another Rate Hike, Despite Oil Price Falls!

After coming very close to lifting the OCR back in May, today the Reserve Bank of New Zealand Monetary Policy Committee reached consensus to increase the OCR by 25 basis points to 2.50 percent, which was consistent with market pricing. There are important lessons here for Australia and other countries too given the uptick in inflation and the market pricing of higher interest rates. Interest rates are likely to stay higher for longer, again. Importantly, while the MPC concede that while near term inflationary pressures have eased a bit, thanks to the partial reopening of the Strait of Hormuz with a fall in global oil prices and petrochemical prices, the effects of the shock will linger for some time and the outlook for medium-term inflation pressures remains uncertain. Refined petrol prices have fallen but remain above pre-conflict levels. The stance of monetary policy they say is calibrated to bring inflation back to target without causing unnecessary economic instability. Even though the RBNZ has cut its inflation outlook relative to May’s forecast, some Monetary Policy Committee members are concerned that there will be lingering inflation impacts from the spike in fuel and materials costs. Specifically, recent energy cost increases could still flow through to consumer prices, Non-tradable inflation remains high, with the risk that administered (i.e. government-set) price inflation could remain strong, Firms could become more sensitive to cost increases against a backdrop of elevated inflation and lift prices in response; Firms might also be inclined to slip through additional price increases given the ‘cover’ of the energy-related price shock; and in contrast, if an environment of weak demand remains, some businesses may not be able to readily pass on cost increases to customers. And the sting in the tail: With inflation still above target and economic activity expected to strengthen, some further reduction in monetary stimulus is likely to be required to return inflation to the 2 percent target mid-point. Future OCR decisions will depend on how incoming data, price-setting behaviour, and the strength of economic activity affect medium-term inflation pressures. http://www.martinnorth.com/ Details of our one to one service are here: https://digitalfinanceanalytics.com/blog/dfa-one-to-one/ Go to the Walk The World Universe at https://walktheworld.com.au/ Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts Please consider supporting our work via Patreon: https://www.patreon.com/DigitalFinanceAnalytics The full detailed set of post code data is available as a subscription service. Or make a one-off contribution to help cover our costs via PayPal at: https://www.paypal.me/MartinDFA We also can receive bitcoins at: 13zBL1oRib9VJu8Uc9zUGNhxKDBBgUpDN1 Please share this post to help to spread the word about the state of things.... Caveat Emptor! Note: this is NOT financial or property advice!! 🚨BEWARE OF SCAMMERS🚨 As there are accounts impersonating Walk The World in the comments on YouTube, note that our comments will have a distinguishable verified symbol. And remember that we will never message you asking you to give us money or talk to us on other platforms such as WhatsApp or Telegram