RBNZ Shadow Board majority favours 75BPS rate rise

Reserve Bank of New Zealand Shadow Board members recommend another hike in the Official Cash Rate (OCR) in the Reserve Bank’s upcoming November meeting. However, there was a range of views on the size of the increase.

''The majority view was that the OCR should increase by 75 basis points to 4.25 percent, given that strong action is required to bring down domestic inflation pressures.

One member also considered that, given the rapid increase in the US Fed rate in recent months, any increases smaller than 75 basis points would weigh on the New Zealand currency and add to inflation pressures as prices of imported goods increase. Three members preferred a smaller OCR increase. Two of them highlighted the increased risk of entering another recession if the RBNZ increases the OCR by more than 50 basis points, and the other member was concerned about the increased costs for owners of SMEs.

Regarding where the OCR should be in a year, the Shadow Board’s core views ranged from 3.50 percent to 5.25 percent. One member noted that more central banks are increasing their interest rates at a less rapid pace now, and the Reserve Bank should take similar actions in the coming year. Some members pointed out that the Reserve Bank should consider the cumulative effect of interest rate increases on the New Zealand economy more carefully when determining the degree of tightening next year.''

NZDUSD update

From a bullish perspective, the price is on the backside of the micro trend, and given the recent recovery 0.6060 structure, a bullish bias could be argued. In the other hand, if bulls fail to hold on to the 0.6100 area, a bearish case could be made: