New Zealand Monetary Policy

New Zealand

Central Bank stays put, remains on track for hike next year

At its 31 October monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) decided to maintain the official cash rate (OCR) at the record low of 2.50%.

In its accompanying statement, the RBNZ acknowledged that the economy continues to gain solid momentum due to increasing consumption and construction activity in Canterbury and across the country. Regarding price developments, the Bank noted that inflation accelerated in the third quarter and that, as domestic demand increases, consumer prices are expected to rise further and move toward the mid-point of the inflation target (1.0%-3.0%). In addition, the Bank reiterated its commitment to continue to monitor the persistently-high housing prices.

October's Monetary Policy Statement (MPS) showed no substantial change compared to the September statement. RBNZ's message was that the OCR will remain unchanged for the rest of 2013 and that future increases in the key monetary policy rate are likely to occur next year, but that the exact timing and extent of the hiking cycle will depend on the degree to which the buoyant housing market and construction sector generate inflationary pressures.

The majority of FocusEconomics panelists expect the Bank to maintain the official cash rate stable this year, with an average forecast of 2.53%. For 2014, participants see interest rates ending the year at 3.33%.

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New Zealand Monetary Policy Chart

New Zealand Monetary Policy October 2013

Note: Official Cash Rate (OCR) in %.
Source: Reserve Bank of New Zealand.

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