October 18, 2021

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With the first rate hike in seven years, New Zealand leads the world in austerity

The delta variation continues to affect New Zealand, extending restrictions on movement in Auckland and surrounding areas. However, the central bank’s intention to support the economy in that context has backfired as concerns about rising property prices and inflation in general are mounting.

In this sense, the Reserve Bank of India (RBNZ)This is considered one of Chile’s central bank criteria, which decided to raise its interest rate by 25 basis points to 0.5% during Wednesday’s session, qualifying for the first increase in seven years.

As the company progresses rapidly, the milestone will be the starting point of a process to reduce cash expansion. “Further elimination of monetary policy stimulus is expected over time, and future movements will depend on the medium-term outlook for inflation and employment.”, He held a Release Released two days after the meeting.

Norway was the only country to take this step on September 23, with New Zealand leading the way in reducing stimulus from developed countries, with an increase of 0.25%. “A normalized economy now says it is appropriate to begin a gradual normalization of the policy ratio,” the governor said. Bank of Norway, Inystein Olsen.

Meanwhile, emerging markets are already advancing more firmly in these ways. Chile, Brazil, Colombia, Peru, Mexico, South Korea and Russia have taken that step. Eastern Europe, Poland, the last to join the group, on Wednesday raised rates for the first time in nine years.

The increase from a historic low of 0.1% to 0.5% is precisely explained by the rise in prices. “Inflation in Poland, according to statistics, Poland’s initial estimate for September 2021 has risen to 5.8% year-on-year,” the report said. National Bank of Poland.

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In this regard, they explained that “high inflation was to a large extent due to factors such as global energy prices and global prices of agricultural raw materials, which were beyond the control of national monetary policy, rather than the increase in electricity earlier than a year ago.” Prices and waste disposal fees, as well as hassles. In global supply chains and international transport “.

As for New Zealand, RBNZ says that “global economic activity continues to recover” due to both monetary and financial stimuli and vaccine advances. In this framework, “although economic uncertainty continues to be high, pressures on spending are mounting due to the major impact of Govt-19 and some central banks have begun the process of reducing monetary policy stimulus.”

More about Monetary politics

Commenting on this analysis of the global environment, the Adrian O’Reilly-led firm hopes that despite the dramatic shrinkage of the economy during the recent “national siege on health”, the strength of the general balance of households and institutions, continued fiscal policy and strong trade regulations will ease economic activity as easing cautionary measures. Recent economic indicators support this panorama.

Adrian Orr, Governor of the Reserve Bank of New Zealand.

All of the above weigh heavily on what is happening to the CBI in the definition of New Zealand monetary policy. As mentioned in this connection, “Short-term inflation has been exacerbated by rising oil prices, rising transportation costs and the impact of supply shortages, and these immediate relative price shocks pose a risk of general inflation.

Taking those factors into account, the New Zealand Center estimates that inflation – which reached 3.3% in the second quarter, will rise to 4% in the short term, according to the latest official data released. That is, “before returning to the middle of the 2 percent in the medium term,” they argue.

For Norges Bank, inflation is still a major concern. However, they said in their report that “increased activity and higher wages will help push inflation towards the 2% inflation target.” However, the Norwegian central government expects a new rate hike in November.

In response to the New Zealand challenge, Jason Wong, BNS’s senior market strategist at Wellington, told Reuters that RBNZ’s commitment “is in line with everyone’s expectations.” “We are going for a continuous rate hike and the market is appreciating it,” he said.

His comment was shared by Citibank economist Josh Williamson, who pointed out that they continue to expect an “extra rate hike of 25 basis points instead of 50 basis points.”

As we move forward, news about monetary policy will come. In early November it was the US Federal Reserve system that could announce a reduction in its bond purchases.