The New Zealand dollar rose by 30 points against the U.S. dollar in the short-term, and the Reserve Bank of New Zealand considered raising interest rates by 50 basis points

On Tuesday afternoon, the short-term gains of the New Zealand dollar against the US dollar expanded to 30 points. Earlier, the Reserve Bank of New Zealand Assistant Chairman Hawkesby said that the Reserve Bank of New Zealand had considered raising interest rates by 50 basis points.

This implies to a certain extent that New Zealand is facing huge inflationary pressures. Hawkesby, Assistant Chairman of the Federal Reserve Bank of New Zealand, said that policy decisions will not be closely related to the new crown epidemic. He added:

The Reserve Bank of New Zealand delayed raising interest rates because of communication challenges, not risks.

Last week, the local epidemic in New Zealand drastically changed the market’s expectations of the Reserve Bank of New Zealand. Currently, the market believes that there is only a 50% chance that the bank will raise interest rates at the October meeting.

Westpac previously predicted that under the assumption that New Zealand’s lockdown period will be short and the economy will soon return to the path of recovery, it is expected that the New Zealand dollar will return strongly before the end of the year, standing at 0.74.

The bank expects that the New Zealand economy will remain active for the rest of this year, the Federal Reserve Bank of New Zealand has issued a signal to raise interest rates, the New Zealand-US Treasury yield spread is rising, and the outlook for commodity prices is optimistic. These fundamentals should be New Zealand dollar to US dollar. Provide support.

Due to high inflation, New Zealand is still expected to become the first advanced economy to raise interest rates. In the second quarter, the country’s consumer price index rose to 3.3%, setting a record high in the past 10 years, significantly surpassing the central bank’s target.

Earlier, the President of the New Zealand Federal Reserve, Orr, said that inflation expectations must not be allowed to run out of control.

After the postponement of interest rate hikes, analysts generally believe that the scale of the epidemic will determine the future monetary policy of the central bank.

Michael Gordon, Chief Economist of Westpac Bank, said:

"Regardless of the economic reasons for raising interest rates, there is no benefit in pushing up interest rates now, and we should wait for the situation of the new crown epidemic to become clearer."

Gordon said that experience shows that economic activity will rebound after the epidemic stabilizes. By then, the central bank will face many old problems: cost pressures and capacity constraints hinder economic growth, and inflation may become more persistent.

On Monday, New Zealand Prime Minister Ardern announced that the blockade measures will be extended to midnight on August 27, and said that the (blockade) measures will be reassessed on August 27.

The market had previously worried that New Zealand would repeat the mistakes of Australia, which failed to control the Delta variant. The lockdown may be extended, thereby damaging the mood in New Zealand.

At the same time, Fitch Ratings Asia Pacific Economic Director Maxime Darmet said before New Zealand announced the lockdown that most major central banks in the region are unlikely to raise interest rates anytime soon.

With the exception of New Zealand and South Korea, the major central banks in the Asia-Pacific region are not in a hurry to start raising policy interest rates.