The Reserve Bank of New Zealand (RBNZ) has raised its official cash rate (OCR) by 50 basis points to 1.5 percent, its biggest such increase in 22 years amidst concerns about surging inflation.
RBNZâs Monetary Policy Committee decided on April 13 that it was best to tighten monetary conditions at a speed that will support sustainable employment and maintain the stability of prices. The committee agreed that âmoving the OCR to a more neutral stance sooner will reduce the risks of rising inflation expectations. A larger move now also provides more policy flexibility ahead in light of the highly uncertain global economic environment,â the bankâs press release said.
Inflationary pressures are rising, exacerbated by ongoing supply chain disruptions due to COVID-19. The Russian invasion of Ukraine has âsignificantly addedâ to the supply disruptions, causing international energy and commodity prices to spike.