MNI BRIEF: RBNZ Hikes OCR 25bp To 2.5%

The Reserve Bank of New Zealand's Monetary Policy Committee voted unanimously to raise the Official Cash Rate by 25 basis points to 2.5% on Wednesday, signalling that further increases are likely.

The decision was widely expected. (See MNI RBNZ WATCH: Hikes Considered, But Not Certain) 

While the Committee indicated additional tightening is likely, it provided no guidance on the timing of future moves. "Future OCR decisions will depend on the Committee's judgement about how price-setting behaviour and excess productive capacity affect medium-term inflation pressures," it said.

The Committee noted the decision to raise the OCR reflected an easing in financial conditions in recent weeks after a significant tightening earlier this year. "Increasing the OCR at this meeting is intended, in part, to avoid an unwarranted further easing in financial conditions," the MPC added.

The Committee agreed it was appropriate to begin reducing monetary stimulus to ensure inflation returns to target over the medium term. "A 25bp OCR increase was considered consistent with the mandate of ensuring low and stable inflation, while avoiding unnecessary instability in output, employment, interest rates and the exchange rate," it said.

Governor Anna Breman is due to hold a press conference at 3 p.m. New Zealand time.