Inflation is still too high and persistent, and employment is beyond its maximum sustainable level, the bank said. And the recent severe weather events in the North Island have led to higher prices for some goods and services.
The highest OCR was 8.25 per cent in July 2007 during the global financial crisis and it had not been above 3.5 per cent since March 2014 before the bank began the first of its 11 increases in October 2021.
Greg Smith, head of retail for Devon Funds Management, said the latest increase by the Reserve Bank was “a negative surprise. It has decided inflation is the primary reason to go hard, while other central banks are talking up the need to wait and see the lag impact of the interest rate rises on the economy.
“Our bank has stuck to its aggressive form book. It was one of the first globally to raise rates and it looks like it could be one of the last to end the increases. I thought the latest OCR rise would be lower.”
Smith said the New Zealand economy contracted in the December quarter when people were expecting an expansion; businesses are not confident; the job market is not as tight as it was; the export market is under pressure if you consider Fonterra’s outlook; the property market is in reverse and having a wealth effect; and consumers are cash strapped.
ANZ headlined its market note: “Take that.” The New Zealand and Australian Reserve Banks continue to choose startlingly different paths in the face of very similar inflation numbers (6.8 per cent and 7.2 per cent) respectively.
ANZ is now predicting an OCR peak of 5.5 per cent, with three cuts late next year. The latest inflation rate will be known on April 20 when the March consumer price index is released.
Trading was muted, with few major movements. Port of Tauranga gave up a strong gain the day before by falling 16c or 2.52 per cent to $6.19.
Fletcher Building declined 7c to $4.45; Heartland Group shed 7c or 4.32 per cent to $1.55; Serko decreased 14c or 5.86 per cent to $2.25; Synlait Milk was down 5c or 2.26 per cent to $2.16; and Sanford shed 10c or 2.44 per cent to $4.
Meridian Energy, down 1c to $5.30, has negotiated a flexible supply agreement with NZ Aluminium Smelters for the remainder of the year and next year. It means Meridian can ask for a reduction in the consumption of electricity at the Tiwai Point smelter by up to 50MW, taking pressure off the network during times of a hydro shortage or outages.
Other energy stocks Manawa was down 5c to $4.85, and Mercury declined 3c to $6.27.
Arvida Group, down 1c to 97c, told shareholders in an investor newsletter that the retirement sector was exposed to the slowdown in the housing market, increasing cost of construction and continued lag in sector funding.
However, demand for quality retirement living and aged care remained strong with the dynamic of an ageing population and demand fundamentals remaining unchanged.
Arvida said the $902m Ryman capital raise, the third largest on the NZX, had a significant impact on share trading across the sector. Arvida has fallen from $1.72 over the past 12 months.
Oceania Healthcare increased 3c or 4.17 per cent to 75c, and Ryman Healthcare was unchanged at $5.38.
Spark, unchanged at $5.03, outlined its three-year strategy to the market, which includes investing $250-$300m in data centres and $40-$60m in 5G and opening up new mobile and broadband opportunities, as well as developing new high-tech digital solutions.
Other decliners were Mainfreight shedding 50c to $70; Winton Land falling 10c or 5 per cent to $1.90; Move Logistics decreasing 3c or 3.06 per cent to 95c; ikeGPS down 3c or 3.53 per cent to 82c; and Seeka giving up 8c or 2.68 per cent to $2.90.
Retailers Michael Hill was down 3c or 2.78 per cent to $1.05, and Hallenstein Glasson declined 7c to $5.69.
Amongst the gainers, Restaurant Brands increased 14c or 2.15 per cent to $6.65; MHM Automation added 2c or 2.17 per cent to 94c; and AFT Pharmaceuticals improved 5c to $3.45.
