New Zealand Monetary Policy

New Zealand

Reserve Bank of New Zealand leaves OCR on hold

At its 30 October monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) unchanged at 3.50%. This represents the second time that the rate was left on hold following four consecutive rate hikes.

The Central Bank underlined that New Zealand has grown at a fast pace during the year to date The construction sector, high immigration and low interest rates drove the expansion of the domestic economy and are expected to be supportive of future growth. During the coming years, the Central Bank forecasts that growth will moderate.

Regarding international developments, the RNBZ noted that global economic growth remained moderate and that it expects a slight slowdown among most major economies. On the upside, the Central Bank sees monetary policy in all major economies remaining supportive to growth. In addition, the RBNZ expects that a further notable depreciation of the New Zealand dollar (NZD), which has been weakened due to lower commodity prices and financial market volatility, will be supportive for the performance of the external sector.

According to the Central Bank, inflation was modest owing to low wage inflation, well-anchored inflation expectations, subdued global inflation, dropping oil prices and the high NZD. However, the RBNZ expects inflation to gradually increase.

The RBNZ signaled a neutral stance regarding future monetary policy decisions in stating that, “[a] period of assessment remains appropriate before considering further policy adjustment.” The next monetary policy meeting is scheduled for 11 December.

FocusEconomics panelists expect that the OCR will end this year at 3.55%. For 2015, participants see the interest rate ending the year at 4.19%.

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New Zealand Monetary Policy Chart

New Zealand Monetary Policy October 2014

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

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