RBNZ considered a 50 bps rate hike

SINGAPORE: The Reserve Bank of New Zealand kept interest rates steady last week mostly because it would have been hard to communicate the case for a hike on the same day the country was locked down, Assistant Governor Christian Hawkesby said on Tuesday.

Hawkesby also said policymakers considered a 50 basis point hike and that future policy decisions were not going to be tightly linked to lockdowns.

His comments, in an interview with Bloomberg, helped the New Zealand dollar extend a recent bounce to touch a one-week high of $0.6932.

The RBNZ had been poised to lift the benchmark cash rate last week, but instead left it on hold at a record low of 0.25% after New Zealand detected its first locally-spread cases of COVID-19 in six months.

"It was less about COVID stopping us doing it and it was more about the timing of communicating our policy move - was the 18th of August the right day as the country went into lockdown," Hawkesby told Bloomberg.

"A 50 basis point move was definitely on the table in terms of the options that we actively considered," he said.

New Zealand recorded its highest jump in daily cases since April 2020 on Tuesday, but authorities said it was reassuring that the count was not increasing exponentially.

However Hawkesby said the trajectory of the virus was not necessarily the top consideration at the central bank.

"Our decisions around monetary policy aren't going to be tightly linked to COVID and whether we're in lockdown or not," he said.

"Lockdowns have been about delaying the timing of spending rather than taking away spending in total," Hawkesby said, while supply shocks have been far more persistent and inflationary.

Expectations for a rate hike in October firmed slightly on Tuesday with swaps priced for an even chance the cash rate is lifted to 0.5%.

RBNZ Chief Economist Yuong Ha had told Reuters on Monday that the outbreak was not a "game changer" for the economic outlook at this point.