Our Central Bank has long argued it is not to blame for high inflation, which it insists is a global phenomenon. That is, rate hikes are being done in NZ along the same lines as other countries to address the same global problem. Yet this past week the Bank announced the Official Cash Rate has reached its peak & lower rates are anticipated from now on.
So lets compare the RBNZ's line with the US Federal Reserve which, according to our own Central Bank, is faced with the same problem.
On 4 May, US Federal Reserve Chair, Jerome Powell, was asked whether it would hike rates again. Powell refused to rule out further action, saying: "We'll be driven by incoming data." Several hours ago, Reuters News stated, "Expectations are growing though that even if the Fed leaves rates unchanged in June, it will pull the trigger (and increase rates) in July". Odds in futures markets are running three to one in favor of a rate hike by then". Our RBNZ has said it will not be driven by incoming data, but instead we are at peak OCR.
Inflation is running lower in the US than NZ. Even so, Minneapolis Federal Reserve President Neel Kashkari told Reuters, "maybe we have more work to do with monetary policy.”
My question is - given our Central Bank has stated all countries are suffering from the same global phenomenon of high inflation caused by the same international factors, being the likes of the Ukraine War and global supply chain problems, how come the US Fed says it cannot rule out further rate hikes though-out 2023, even though its Funds Rate is almost identical to ours, yet the RBNZ is able to announce our interest rates have peaked?
There are only two explanations. One is that our Reserve Bank has reversed itself and is now saying NZ is unique & our inflation & monetary conditions have nothing to do with others, having argued the opposite for years. Or second, that it has begun contradicting the US Federal Reserve President (who says he must wait for incoming data before deciding what to do throughout 2023) because the RBNZ is voting for a Labour-Green-Te Pāti Māori coalition and wants to ensure those parties success in the election by saying we are at peak OCR.
Sources:
https://www.reuters.com/markets/us/traders-boost-bets-fed-rate-hike-after-inflation-data-2023-05-26/