Already a subscriber?The Reserve Bank of New Zealand warned on Wednesday that it may resume raising interest rates due to sticky inflation, wrong-footing traders who had anticipated the central bank would signal rate cuts given the economy is in recession.
More worryingly, it anticipates the cash rate to peak at 5.7 per cent by Christmas, suggesting the next interest rate could be up, not down. Yet, the Bank of Canada could be the first among major policymakers to lower its 5 per cent policy rate after data overnight showed the annual inflation pace slowed to a three-year low of 2.7 per cent in April.In contrast, NZ’s annual consumer price index is running at 4 per cent, well outside the RBNZ’s 1 per cent to 3 per cent target band as non-tradable inflation proves stubborn. This is despite the central bank being among the first to start tightening to get on top of inflation.