Marketmind: Another rate hike from New Zealand

1 min read
Traders work at Frankfurt's stock exchange in Frankfurt

A look at the day ahead in markets from Dhara Ranasinghe.

The Ukraine crisis may be tempering the most aggressive rate hike bets but New Zealand’s latest interest rate rise suggests central banks remain firmly on the path towards tighter policy.

The Reserve Bank of New Zealand on Wednesday delivered its third straight rate increase, taking key policy rates to 1%. And it signalled a more aggressive tightening path to counter inflation, lifting the Kiwi dollar to a one-month high.

It also revealed plans to wind down its NZ$50 billion ($33.82 billion) bond holdings.

Officials at other central banks also made clear rate hikes were on their minds.

Bank of England deputy governor Dave Ramsden on Tuesday said he expects to see further tightening ahead while ECB policymaker Robert Holzmann is being quoted this morning saying the ECB could hike rates in the summer, before ending its bond buying.

Still, tensions between the West and Russia over Ukraine do complicate the outlook for policy, especially at the ECB. Germany’s decision to put Nord Stream 2 certification on hold sent European natural gas futures sharply higher.

Further upward pressure inflation could be a by-product of the geopolitical tensions.

For now, markets are on steadier ground as investors await fresh developments. Asian stocks steadied overnight, European and U.S. stock futures are firmer.

On the earnings front, British bank Barclays said its annual profit nearly trebled as bad loan charges plunged and its investment bank continued its strong recent performance.

(Graphic: New Zealand’s key rate rises to 1%, https://fingfx.thomsonreuters.com/gfx/mkt/zgvomzwdevd/NZrates.PNG)

Key developments that should provide more direction to markets on Wednesday:

– Rio Tinto full-year profit soars on iron ore prices

– German GFK consumer sentiment

– WTO’s General Council starts two-day meeting

– ECB: board member Frank Elderson;  ECB VP Luis de Guindos speak

– Fed: Altanta Fed president Bostic speaks

– South African budget

– US 5-year note auction/2-year floating rate note sale

– US earnings: Lowe’s, Office Depot, Molson Coors, eBay,

– European earnings: Stellantis, Merlin, Avast, Rio Tinto, Iberdrola, Barclays, Danone, Puma, Metrobank

(Reporting by Dhara Ranasinghe; editing by Sujata Rao)

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