The Reserve Bank has held the official cash rate unchanged at 2.25 percent
New governor Anna Breman has emphasised a ‘laser focus’ on low inflation
Forecasts indicate the next OCR move will be a rise early next year
The economy is improving, but the recovery is uneven
The Reserve Bank (RBNZ) has held its benchmark official cash rate (OCR) unchanged at 2.25 percent, saying it needs to get inflation under control, but does not want to upset the economic rebound.
The decision was expected and the central bank emphasised it was balancing the need to support economic recovery with stimulatory rate settings, while reducing inflation pressures.
Inflation reached 3.1 percent at the end of last year, above the RBNZ’s target band.
“The committee is confident that inflation will fall to the 2 percent midpoint over the next 12 months due to spare capacity in the economy, modest wage growth, and core inflation within the target band,” the Monetary Policy Committee (MPC) said in a statement.
It said economic growth was uneven and recovery would be gradual with a muted housing market, cautious domestic consumption, low migration, slow wage growth and a weak labour market weighing on inflation.
But a gradual fall in retail interest rates was feeding into household budgets and could spur stronger activity, with businesses looking to increase prices and keep up inflation.
“If the economy evolves as expected, monetary policy is likely to remain accommodative for some time.”
“The committee will continue to assess incoming data carefully. As the recovery strengthens and inflation falls sustainably towards the target midpoint, monetary policy settings will gradually normalise.”
The latest statement and forecasts pointed to an OCR rise most likely early next year.
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