- Graeme Wheeler RBNZ Governor
The Reserve Bank of New Zealand can now be called as the most decisive and brave central bank in the world. We were expecting more tightening in the recent months, however, there were doubts more action will come this month. Nevertheless, the RBNZ made its third consecutive rate hike during June's meeting, bringing the official cash rate to 3.25%, with promise to make more revisions in the coming months. The central bank cited growing locally-driven inflationary pressure, mostly coming from the housing market, as well as high commodity price and strong net migration as main factors behind the decision. The non-tradables inflation rate is likely to increase to 2.9% in the June quarter, bringing the headline indicator of consumer prices to 1.7%. The central bank is trying to achieve 2% inflation in the long-term, however, it usually takes between 12 and 18 months before rising interest rates will affect the inflation rate. Graeme Wheeler claimed his readiness to make further adjustments with the bank's 90-day bill rate, which is considered as a proxy of further changes to the OCR, is also pointing the RBNZ will raise the rate by additional 50 basis points by the end of this year and 100 points by June 2015.
As it was expected, the kiwi continued its appreciation on the back of positive news from the RBNZ. The currency index soared 1.2% versus all of 31 major currencies, adding to earlier gains. The key resistance for NZD/USD is located at 0.87.
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