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Guess what? The RBNZ just hiked interest rates again! Is there no stopping the New Zealand central bank from tightening monetary policy? Let’s see if there are any clues from their latest rate statement.

1. Hike, hike, hike!

Yep, that’s right, the latest 0.25% benchmark rate increase marks the RBNZ’s third consecutive monthly rate hike, making it the most hawkish major central bank thus far. The latest hike puts their benchmark rate at 3.25%, offering a large positive interest rate differential from that of other central banks.

RBNZ Governor Wheeler noted that economic growth has gained enough momentum and is likely to be sustained in the coming months. Despite the recent drop in dairy prices, Wheeler insisted that commodity price inflation remains high and that their latest tightening move is aimed at keeping price pressures at bay.

2. RBNZ is not done tightening.

Hawkish is as hawkish does, huh? In his press statement, Governor Wheeler went on to say that the central bank would like to see interest rates return to a more neutral level. Market watchers interpreted this to mean that the RBNZ will keep tightening monetary policy until inflationary pressures are contained, with some analysts predicting that the benchmark rate could be increased to as much as 3.75% this year.

Recall that the RBNZ previously indicated that they are looking to increase interest rates by as much as 200 basis points this year and so far, they’ve hiked by a total of 75 basis points. The latest announcement didn’t contain any changes to this outlook, as the RBNZ’s policy bias seemed much more hawkish than many expected.

3. Various market factors keep growth supported.

RBNZ Governor Wheeler also highlighted how different sectors of the New Zealand economy are able to keep growth sustained and longer-term interest rates low. For one, he pointed out that the pickup in construction in earthquake-hit Canterbury is contributing a huge chunk to overall economic activity.

Aside from that, he also mentioned that strong net immigration flows are adding to growth. Combined with stable income growth, this leads to strong housing demand and results to a steady increase in home prices. According to Westpac official Imre Speizer, “soft inflation and wage costs, lower dairy prices and a high NZD have been offset by stronger migration, lower mortgage rates, and a fiscal impulse.”

All in all, the latest RBNZ announcement seems enough to keep the New Zealand supported in the coming months. Of course Wheeler still noted that future monetary policy moves will still be dependent on how economic data turns out. Do you think we’ll see another rate hike next month?