RBNZ Hikes Interest Rates, Focus on FOMC Minutes

February 22, 2023 11:22

The Reserve Bank of New Zealand (RBNZ) raised borrowing costs by 0.5% to the highest level recorded in the last 14 years. The RBNZ’s board said that monetary conditions must be tightened more as inflation remains too high. The board expects headline inflation to decrease to 4.2% by March 2024. The RBNZ’s decision boosted the New Zealand dollar (NZD) against other major currencies.

Investors and traders will be focusing on the Federal Open Market Committee (FOMC) minutes due to be released later today. Market participants will look for comments regarding the possibility of the Federal Reserve (Fed) going back to 50 bps hikes.

RBNZ hikes Official Cash Rate by 50 bps

The RBNZ’s board announced its decision to hike its benchmark interest rate by 50 basis points, reaching 4.75%. The decision was in line with analysts’ expectations. The RBNZ’s accompanying report said that 50 and 75 bps increases were discussed during the meeting, adding that the bank expects the cash rate to peak at 5.5%.

The RBNZ’s Governor Andrew Orr noted that the board still predicts a recession over a 9-12 month period and stressed that it would be too early to determine the impact of Cyclone Gabrielle on the country’s economy. RBNZ's Chief Economist Paul Conway mentioned that “near-term price pressures will stay high.” 

Japan National CPI reading due on Thursday

On Thursday, Statistics Japan will publish its National CPI inflation report for January. Economists expect headline inflation to come in at 4.5% on an annualised basis. Japan’s National CPI stood at 4.0% year-on-year in December, hitting a 41-year high and double the Bank of Japan's (BOJ) target level.

In its economic report for February, the Cabinet Office stressed that the Japanese economy is “picking up moderately” despite some signs of weakness. Cabinet officials noted that wholesale prices remain at high levels compared with a year earlier but are flat from the previous month.

According to a report published last week, the Japanese economy rallied in the last quarter of 2022, expanding by 0.6%.

German GDP report on Friday

On Friday (Feb. 24), the Federal Statistics Office in Germany will publish a set of data related to the country’s GDP. Market analysts suggest that the German economy expanded by 1.1% in the fourth quarter of 2022 on a year-to-year basis.

A report published by the European Commission (EC) in mid-February suggested that the German economy is expected to grow moderately in 2023. The EC’s figures showed an anticipated GDP growth of 0.2%, thus upgrading the previous –0.6% forecast. The report added that the German GDP is expected to suffer another mild decline in early 2023 and forecasts a 1.3% expansion in 2024.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.