RBNZ's Ha: New variant is unlikely to halt the bank rate rises

Reserve Bank of New Zealand (RBNZ) Chief Economist Yuong Ha said in a Wall Street Journal (WSJ) interview on Monday, the new Omicron covid strain is unlikely to alter the central bank’s rate hike plans.

Key quotes

“RBNZ would have raised the cash rate even if Omicron had become known before the central bank's policy statement.”

“The situation now is different from August, when the RBNZ had delayed a rate increase due to a Delta variant outbreak that followed months of zero COVID-19 cases.” 

"The difference is we are now transitioning into a new Covid protection framework.”

"What that means is we are getting used to the idea of living with Covid, so Omicron, I don't think it changes the outlook, it probably just reinforces the downside risks we saw in the projections.”

"If Omicron turns out to be a massive game-changer, that might be kind of like August where we just took a pause.”

 “The Omicron COVID-19 variant would need to have a dramatic economic impact to deter the Reserve Bank of New Zealand from continuing to raise interest rates.”

Market reaction

NZD/USD fails to benefit from these comments, as it trades modestly flat around 0.6830, at the press time.