Why Did The RBNZ Say We're At The End Of The OCR Cycle?
The RBNZ needs to be detached from the Labour party
It's interesting that the RBNZ said that we're at the end of the tightening cycle1, recently. One would think that if they thought we were at the top, they wouldn't have increased the OCR upon this announcement; it would have been better to say that they're going to watch it and hold for a while.
The reason I say this is because what the RBNZ say matters almost as much as the changes to the OCR. Sure the OCR affects affordability of debt and therefore inclination to take on that debt, spend or save; but what the RBNZ says in their announcements also affects how the market reacts. For example, if they were to say that future increases could be coming, that would create increased caution, affecting saving and spending habits.
So why did they say that they're at the end of the cycle? If they said it to attempt to stave off recession, they'd have been better to not increase the OCR if it's that close. They basically did one thing then said something to have the opposite effect of what they did.
Therefore I think that the fact they said that means that they think there are probably more increases to come. Unfortunately I think that this was said for political reasons, which is quite corrupt/treasonous if this is the case, but I can’t see any other reason for this (perhaps you might share an opinion in the comments - hopefully I’ve got this wrong)!
This would mean that they've reduced the impact of the OCR increase at the financial cost to NZ people in order to reduce the political impact of inflation on the Labour party for the upcoming election.
This is why it's so important that the RBNZ is completely detached from politics so they can do their critical jobs properly.
Is More inflation Coming?
My feeling is that it is, or at least that it will be more persistent than the RBNZ have inferred. In addition to the recent politically charged statement from which I deduce will cause inflation, I'm still seeing food prices increase at the supermarket and the recent data from Stats NZ states that employment has increased by 0.6%2. Whichever party comes to power at the end of the year is going to have a bad first year with increased risk of recession and leftover persistent inflation.
The source of this information was actually from an email from Stats NZ, but since I can’t reference that, I’ll leave you with a link to the Stats NZ Employment Stats, which will hopefully be updated to reflect the April data mentioned in the email.