New Zealand Central Bank to Hike Rate Again at Next Two Meetings, ANZ Says

The Reserve Bank of New Zealand's (RBNZ) consensus decision to raise its official cash rate to 2.5% was in line with expectations, and further increases to borrowing costs are likely before the end of the year, ANZ said in a Wednesday report. In raising the rate by 25 basis points, the central bank pointed to a continuing need to reduce monetary stimulus as inflation remains above target, warning that the lingering impact of the energy shock could keep the medium-term inflation outlook uncertain. The RBNZ offered little urgency in its forward guidance, which is "consistent with our view that there was little to be gained from providing very strong guidance in such uncertain times," ANZ said. ANZ still expects rate hikes at the central bank's next two meetings in September and October, which would take the rate to 3%, as New Zealand's economic upswing becomes more entrenched. "We are optimistic that the economy will get back on track before long," ANZ said, adding that the economy doesn't need stimulatory monetary policy any more as "the underlying story is now a much more cheerful one" compared with the peak of the oil price shock.