RBNZ Hikes Rates Amid Inflation Concerns as Oil Prices Surge
The Reserve Bank of New Zealand (RBNZ) has raised interest rates for the second consecutive meeting, aiming to combat high inflation. The benchmark interest rate now stands at 2.75%, narrowing the gap with the US interest rate, which ranges between 3.50% and 3.75%. Despite this hike, the NZD/USD exchange rate has continued its downward trend, reaching a new low since August 13.
The RBNZ cited inflation as a major concern, with the Consumer Price Index (CPI) rising to 4.1% in the June quarter due to high crude oil prices. While core inflation remains elevated, officials expect it to return to target levels by 2027. The bank also warned of weak income growth, job insecurity, and flat house prices affecting household spending.
The crisis between the US and Iran has contributed to rising crude oil and transportation costs, which may remain high in the coming weeks. As a result, New Zealand's ten-year bond yield jumped to 4.86%, its highest level since March 23rd. The same trend is observed in the US, where ten- and thirty-year yields rose to 4.8% and 5.28%, respectively.