OCR increase labelled a reduction in monetary stimulus

Picture: RBNZ Governor Anna Breman (Supplied)

Economists at the major banks had been divided about what RBNZ would decide but will likely be surprised that the monetary policy committee (MPC) managed to reach its decision by consensus, unlike its last decision in May at which governor Anna Breman used her casting vote to break a tie.

However, the minutes of the meeting showed that external committee members Prasanna Gai and Hayley Gourley think the risks to inflation are skewed to the upside while the third external member, Carl Hansen, sided with the three RBNZ members in assessing the risks “as broadly balanced.”

The central bank warned that “some further reduction in monetary stimulus is likely to be required to return inflation to the 2% target mid-point,” but said the timing of further hikes “is highly uncertain.”