As investors wonder how far the Reserve Bank of New Zealand (RBNZ) will raise its interest rate, the central bank has not ruled out the possibility of raising it as high as 4.25% to control inflation.
The central bank's latest forecast shows the official cash rate will peak at 4.1% in mid-2023, but there is a possibility that it could rise to 4.25%, Deputy Governor Christian Hawkesby said.
In an interview with Bloomberg News on Monday, Hawkesby said the RBNZ had not set a new estimate for the neutral position but they had discussed a range of 2% to 3%.
He also said the economy has been more resilient than expected, with consumption and domestic demand holding up more than suggested by business and consumer confidence surveys.
Additionally, the RBNZ projects that job growth will stall next year but the economy will avoid recession. It also sees inflation slowing from the current 7.3%, to 3.8% by the end of 2023.
Hawkesby said the central bank predicted a period where the economy was slowing, but it was a period where the labor market was starting from a very strong starting point.
The humidity both lowers inflation and brings employment to a more sustainable level, he said.
The RBNZ is one of the first central banks in developed countries to begin its cycle of aggressive tightening and interest rate hikes and is also the focus of other major central banks to share their thoughts on policy-setting.
