The RBNZ a Global “terminal” Preview

One of the monetary policy cycle leaders so far has the been the RBNZ in New Zealand. During the pandemic, the RBNZ was one of the more dovish CBs, and even went as far as to actively discussing negative interest rates. In fact, the RBNZ effectively added negative rates to their tool box, even though they never ended up implementing them. At their November 2020 meeting the RBNZ said that they were preparing markets/the economy for a negative OCR rate (official cash rate). By the February meeting, the RBNZ felt the economy/markets were ready:

As of February 2021, we are satisfied with banks’ progress on this initiative and are confident that our banking system could operate effectively if the Official Cash Rate were lowered to or below zero. - February 2021 RBNZ meeting

As of almost 14 months ago, NIRP was operationally ready to go in New Zealand. The RBNZ was also a champion of the, enhanced labor market outcomes at all costs camp. Going into Covid and Covid included, the RBNZ was at the forefront of the dovish central bank pivot.

However, it all changed for the RBNZ at their July 2021 meeting. And ever since then, the RBNZ has been the hawkish leader for global central banks. The question now is, what messages can we take away from the latest RBNZ decisions that are applicable to central banks around the world?