VOT Research Desk
Rising interest rates and widespread high inflation, according to The New Zealand Institute of Economic Research’s (NZIER) most recent Quarterly Predictions, represent a threat to New Zealand’s economic recovery in the years to come.
In reaction to the generalized increase in inflation, central banks around the world have swiftly increased interest rates.
Costs are nevertheless high in the New Zealand economy due to persistent capacity constraints and a resilient demand environment.
The Reserve Bank anticipates continuing significant monetary policy tightening in order to reduce demand and control inflation.
Around the middle of 2023, we anticipate that the detrimental effects of higher interest rates on demand will start to become more obvious, reducing the need for the Reserve Bank to raise interest rates as much as it now anticipates.
However, we anticipate more the OCR will rise over the next year, reaching a peak of 5%.
NZD/USD is gaining headway approaching 0.6200 despite a cautious risk tone as the US Dollar loses some of its recovery momentum. As of this writing, the pair is trading at 0.6185, up 0.33% for the day.
