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Impact of Monetary Policy on inflation and growth rates

The Reserve Bank of New Zealand (RBNZ) announced the increase of the Official Cash Rate (OCR) to 1.50 percent. The Committee agreed it was appropriate to continue to tighten monetary conditions at a pace to best maintain price stability and support maximum sustainable employment.

Headline inflation was rising largely because of disrupted supply chains and higher world commodity prices. Domestic demand pressures, relative to supply capacity, were also pushing New Zealand's core inflation above the Bank's 1 to 3 percent target range.

Referring to Resource 1 above, explain the impact of an increase in the OCR on the value of the New Zealand dollar.

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Answer rating: 100% (QA)

The increase in the Official Cash Rate OCR by the Reserve Bank of New Zealand RBNZ typically leads t... View the full answer