“Sneak peek”: Reserve Bank of New Zealand is expected to hike its official exchange rate by 50bps

This goes through the New Zealand Institute of Economic Research (NZIER). NZIER has set up a “Shadow Board”:

• Its Shadow Monetary Policy Board is independent from the Reserve Bank of New Zealand
• Participants assess what they think the RBNZ should do, but necessarily what it will do

The consensus among analysts is that the RBZ will rise 50 basis points, so in this case, the Shadow Board’s normative view is the same.

Back to the Shadow Board, this in a nutshell:

• The widely held view within the Shadow Board is that the Reserve Bank of New Zealand should increase the official exchange rate (OCR) by 50 basis points at the next meeting in July. Only one member of the business community was divided on the need for such a large increase at the next meeting, given the delicate balance between the increase inflation

  Inflation
  

  Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of evaluating strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates pressure from demand on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
  

  Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of evaluating strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates pressure from demand on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
  

  Read this term and signs of slowing economic activity.
• While many members stressed the need for the Reserve Bank to contain inflationary pressures by raising interest rates, emerging signs of slowing demand raised concerns about the long-term growth outlook.
• June’s final quarter release of the NZIER Quarterly Business Opinion Survey highlighted the difficult balancing act facing the Reserve Bank as inflationary pressures mount amid a slowing global economy. demand in the New Zealand economy.

Earlier:

The RBNZ announcement is scheduled for 02:00 GMT on July 13: