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Daniel Moss

This Time, New Zealand Doesn't Need to Be First

Being among the primary batch of central banks to raise rates could be a recipe for volatility.

A caveat wrapped in an enigma.

A caveat wrapped in an enigma.

Photographer: David Paul Morris/Bloomberg

Sometimes being first is an undesirable superlative. Predictions that New Zealand will be among the primary batch of central banks to raise interest rates roiled markets this week — a signal that, even for historically hawkish places, taper talk is a delicate affair.

The Reserve Bank of New Zealand's projection that its benchmark interest rate will start to climb by the end of 2022 was a shock to investors. Government bonds retreated and the local dollar jumped on expectations the country would join Canada in scaling back stimulus. RBNZ officials said that the domestic and international economies are healing after epic contractions. “Some of the more extreme risks are now off the table, touch wood,” Governor Adrian Orr told reporters after a policy meeting Wednesday, where he kept rates near zero and maintained quantitative easing.