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UPDATE 1 – New Zealand Central Bank Holds Rates, Plans Hike Next Year

By on May 26, 2021 0

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WELLINGTON, May 26 (Reuters) – The Reserve Bank of New Zealand (RBNZ) kept its official treasury rate (OCR) unchanged in a widely expected decision on Wednesday, but projected a rate hike by September of l next year, which would increase the local currency.

The central bank kept its Large Scale Asset Purchase Program (LSAP) at NZ $ 100 billion ($ 72.18 billion). The operation of the Loan Financing Program (FLP) remained unchanged.

In a Reuters poll, economists unanimously expected the RBNZ to keep rates.

In its OCR projections, the RBNZ set the cash rate at 0.5% in September next year and 1.5% by the end of 2023.

The New Zealand dollar rose 0.5% to $ 0.7269 after the central bank announcement.

The bank, however, has tried to play down expectations by saying it will maintain its current stimulating monetary parameters until its inflation and jobs targets are met.

“Meeting these requirements will take a lot of time and patience,” he added in the statement.

Recent positive data, such as unemployment falling to 4.7% and the prices of major commodities, especially dairy, have raised expectations that the bank will tighten rates sooner than previously thought. .

Financial markets are forecasting a first rate move as early as August 2022, although that depends a lot on what other central banks are doing, as the RBNZ might be reluctant to tighten on its own and risk pushing its dollar higher.

“With the RBNZ on its way to becoming one of the first central banks in advanced economies to hike rates, we believe the New Zealand dollar will continue to strengthen against the US dollar,” Capital Economist’s Marcel Thieliant said in a statement. note. ($ 1 = NZ $ 1.3854) (Reporting by Praveen Menon and Renju Jose; Editing by Sam Holmes)