New Zealand Monetary Policy

New Zealand

Central Bank leaves OCR unchanged

At its 13 September monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) left the official cash rate (OCR) unchanged at a record-low 2.50%, in a decision that matched market expectations. The Bank's decision means that monetary authorities have left the main monetary policy rate unchanged for 18 consecutive months. In its accompanying statement, monetary officials argued that it is appropriate to leave the main monetary policy rate on hold given concerns that the Eurozone remains in recession and risks of further deterioration persists. In addition, the Bank acknowledged that growth in China has slowed. That said, the RBNZ pointed out that economic activity will grow modestly "over the next few years". In addition, housing activity continues to grow and reconstruction efforts are expected to boost the construction sector. In contrast, the Bank reckons that fiscal consolidation is likely to dampen domestic demand and fluctuations in the exchange rate continue undermining exports. Regarding price developments, the Bank expects that inflation - which currently stands below 2.0% - will settle "near the mid-point of the target range over the medium term". The next monetary policy meeting is scheduled for 25 October, when Graeme Wheeler will succeed Alan Bollard as governor of the RBNZ. In New Zealand, monetary policy decisions are solely made by the governor and not by a committee as in many other countries.

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