This Reserve Bank of New Zealand meeting was 'live', with more than one bank expecting a rate hike. Not to be though.

Cash rate left at 5.5%

RBNZ forecasts:

  • Sees official cash rate at 5.59% in June 2024 (prior 5.67%)
  • Sees official cash rate at 5.47% in March 2025 ( prior 5.56%)
  • Sees twi nzd at around 71.5% in March 2025 ( prior 70.7%)
  • Sees annual CPI 2.6% by march 2025 ( prior 2.4%)
  • Sees official cash rate at 5.33% in June 2025 ( prior 5.42%)
  • Sees official cash rate at 3.16% in March 2027

Headlines via Reuters from the statement:

  • The OCR needs to remain at a restrictive level for a sustained period
  • The New Zealand economy has evolved broadly as anticipated by the committee.
  • The committee remains confident that the current level of the OCR is restricting demand.
  • Core inflation and most measures of inflation expectations have declined, and the risks to the inflation outlook have become more balanced.
  • However, headline inflation remains above the 1 to 3 percent target band, limiting the committee's ability to tolerate upside inflation surprises.
  • A sustained decline in capacity pressures in the New Zealand economy is required to ensure that headline inflation returns to the 1 to 3 percent target.
  • With high immigration and weaker demand growth, capacity constraints in the New Zealand labour market have eased.

From the minutes to the meeting:

  • Ongoing restrictive monetary policy settings are necessary to guard against the risk of a rise in inflation expectations.
  • Capacity pressures have eased significantly over the past year.
  • The committee agreed that interest rates need to remain at a restrictive level for a sustained period of time.
  • The committee noted that aggregate demand is now better matched with the supply capacity of the economy.
  • The starting point for capacity pressures in the New Zealand economy is only slightly lower than previously assumed.
  • The committee is conscious that the economy has limited capacity to absorb further upside inflation surprises.
  • Recent drops in core inflation and business inflation expectations are encouraging, but they remain above the 2 percent mid-point of the committee’s target band.

RBNZ Governor Orr will speak soon

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