New Zealand Monetary Policy

New Zealand

Central Bank to keep rates unchanged through the rest of the year

At its 14 March monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) left the official cash rate (OCR) unchanged at a record-low of 2.50%, in a decision expected by the market. The Central Bank has kept the main monetary policy interest rate unchanged since March 2011.

In the accompanying statement, the RBNZ argued that recent indicators are sending mixed signals at the outset of the year. According to the Central Bank, "while demand and output are expanding, the labour market remains weak". In addition, the Bank underlined that the rebuilding of the Canterbury region is gaining momentum and investment and business confidence are improving.

However, monetary officials acknowledged that the strong New Zealand dollar continues to weigh on inflation and is undermining "profitability in export and import competing industries", while adding that the ongoing fiscal consolidation will curb growth in domestic demand. Against this backdrop, the Bank stated that as "there are both upside and downside risks to the outlook", officials will keep the OCR unchanged through the end of the year.

A majority of FocusEconomics panellists expect the Reserve Bank of New Zealand to maintain the official cash rate stable this year, with an average forecast of 2.78%. For 2014, participants see interest rates ending the year at 3.63%.

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New Zealand Monetary Policy Chart

New Zealand Monetary Policy March 2013

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

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