RBNZ Deputy Governor Hawkesby open to cash rate above 4% to tame inflation
The Reserve Bank’s forecast track for the Official Cash Rate shows a peak of 4.1% in mid-2023, which means there’s a risk of it climbing to 4.25%, Deputy Governor Christian Hawkesby said in an interview with Bloomberg News Monday in Wellington. “We’re deliberately ambiguous to reflect that uncertainty of where the end point may be,” he said. “It could be 4%, it could be 4.25%, it could be a balanced range around that.” The RBNZ wants to get the cash rate “comfortably” above a neutral setting so that it is slowing the economy and cooling price pressures, but has acknowledged that the neutral level may be higher than its previous estimate of 2%. The central bank last week raised the OCR to 3% from 2.5% and said it remains appropriate to continue hiking “at pace.”
Hawkesby said the RBNZ hasn’t settled on a new estimate for where neutral is but “we’ve talked about a range of 2% to 3%.” “In an environment where we do have strong domestic inflation pressures that we are looking to lean in against you need to be shifting the Official Cash Rate into that zone where you can be more comfortable that you’re doing your work of leaning in,” he said. Hawkesby said the economy has been “more resilient than we had expected,” with consumption and domestic demand holding up more than business and consumer confidence surveys suggested they would.
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