The Monetary Policy Committee of the RBNZ (Reserve Bank of New Zealand) today raised the bank’s OCR (official cash rate) by 50 basis points (1/2 a percent) to 3.0%.
The Governor made the announcement at a press conference this afternoon.
The Monetary Policy Statement Briefing can be found here (web page) or here (PDF).
The next OCR update is on the 5th October, 2022.
An OCR of 3.0% still stimulates the New Zealand economy. The low unemployment in the NZ economy at present assures more high inflation can be expected despite what the RBNZ projects.
Many people in New Zealand benefit from low interest rates except, of course, savers and people on low-to-medium incomes who don't own property or shares.
The RBNZ will consequently never get serious with inflation. The drop in property prices, share prices and debt defaults would be too severe for them to contemplate (despite their public statements).
The paid sophists in the RBNZ will always be able to come up with plausible-sounding reasons (which don't hold up to analysis) for not raising rates.
The RBNZ have got things very wrong since the GFC (global financial crisis) and nothing looks like changing any time soon.
The Governor, as one of the highest paid (if not the highest paid) central bankers in the world, receives triple the salary of the Federal Reserve Chairman (in USD terms).
Clearly, running the monetary policy of a country the size of a small US city is vastly more important than running the monetary policy of the world’s largest economy (by country) not to mention overseeing the global reserve currency.
The purchasing power of New Zealand money will continue to fall at probably near double-digit percentage rates and it will continue to be a near useless store of value (one of the basic functions of money).
People on fixed and low-to-medium incomes will continue to experience rapid declines in their standards of living.
Homelessness will increase (even with the building boom) as buying or renting homes will remain unaffordable for many.
The government will sooner or later turn to its standard salve for economic woes; large scale immigration. New Zealand’s quality of life for its citizens will fall even faster and further.
The solution, of course, is a correction in asset values as a result of interest rate increases.
Some businesses would fail and their assets would be bought and redeployed by successful companies.
A recession would probably occur.
New Zealand would emerge much stronger as a result.
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