RBNZ Minutes: The committee discussed 25 and 50 basis point increases at this meeting

The committee discussed 25 and 50 basis point increases at this meeting.

Committee was comfortable that current lending rates faced by businesses and households will help ensure core inflation and inflation expectations begin to moderate.

Committee is expecting to see a continued slowing in domestic demand and a moderation in core inflation and inflation expectations.

The extent of this moderation will determine the direction of future monetary policy.

Members noted the rapid pace and extent of tightening to date implies monetary policy is now contractionary.

Committee agreed it must continue to increase the official cash rate (ocr) to return inflation to the 1-3 percent target and to fulfil its remit.

Committee agreed that the full impact of this monetary tightening is yet to be fully realised.

Committee members observed that inflation is nevertheless still too high and persistent.

Members viewed the risks to inflation pressure from fiscal policy as skewed to the upside.

Economic growth in New Zealand is anticipated to slow through 2023.

New Zealand’s banks are well capitalised, profitable, and have strong liquidity positions, with plenty of cash on hand.

Rebuilding following recent extreme weather events will provide a boost to activity and inflation.

Committee’s assessment is that there is no material conflict between lowering inflation and maintaining financial stability in New Zealand.

Labor market remains strong.

Economy is starting from a slightly weaker position than assumed in the February statement.

However, demand continues to outpace supply.

Over the medium-term, the inflationary impacts of recent severe weather events are likely to be somewhat larger than assumed at the time of the february statement.

Labor market remains strong, with employment continuing to expand.