New Zealand central bank hits pause with cash rate at 5.5%
NEW Zealand’s central bank held the cash rate steady at 5.5 per cent on Wednesday (Jul 12) as it reiterated its previous rate hikes were constraining spending and taming inflation as anticipated.
The decision was in line with expectations from 25 economists in a Reuters poll, who had forecast the Reserve Bank of New Zealand (RBNZ) would leave the official cash rate (OCR) unchanged after a 20-month hiking cycle.
“The committee agreed that the OCR will need to remain at a restrictive level for the foreseeable future,” the RBNZ’s statement said.
The RBNZ said it now expects inflation to decline from its peak.
“Consumer spending growth has eased and residential construction activity has declined, while house prices have returned to more sustainable levels,” according to the statement accompanying the monetary policy review.
The central bank does not release updated economic forecasts at a monetary policy review.
A front runner in withdrawing pandemic-era stimulus among its peers, the RBNZ has battled to curb inflation, lifting rates by 525 basis points since October 2021 in the most aggressive tightening since the OCR was introduced in 1999.
New Zealand’s annual inflation has come off in recent months, and is currently just below a three-decade high of 6.7 per cent. Minutes from the monetary policy committee meeting said the committee expect inflation to decline to within the central bank’s 1 per cent to 3 per cent target by the second half of 2024.
The rate hikes have sharply slowed the economy, now in a technical recession following two quarters of negative growth. REUTERS
Share with us your feedback on BT's products and services
