NZ RAISES INTEREST RATES

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    It appears that the NZ Reserve Bank has this morning followed suit and raised NZ interest rates for the 2nd time this year.

    The new Official Cash Rate is 5.5% (up 25 Basis Points).

    The NZ/RB has also flagged further rises over the coming 12 months.

    According to this morning's statement:
    1)
    "demand conditions no longer warrant the degree of interest rate stimulus that seemed necessary late last year"; and
    2)
    the NZ economy's "ability to meet increasing demand without pressure on costs, margins and therefore prices appears limited".

    The NZ-RB has also flagged that a more aggressive increasing rate regime is on the cards noting, in its statement, that "further increases in interest rates will be required over the year ahead, possibly to a greater extent than we projected in March".

    This, however, may be a reflection on NZ's current inflationary outlook which is at the top of the 2-3% band allowed for under the RB's operating charter.

    On a global front, the RB noted that:
    1)
    recovery is occurring in global demand;
    2)
    fragile in part; and
    3)
    consensus forecasts are now more optimistic than previously (ie: the outlook is gathering pace).


 
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