New Zealand Monetary Policy

New Zealand

Reserve Bank of New Zealand raises OCR

At its 13 March monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) raised the official cash rate (OCR) to 2.75% from 2.50%, where it had rested since March 2011. The markets had broadly expected the Bank's move. In its statement, monetary authorities noted that New Zealand's economic expansion, “has considerable momentum and growth is becoming more broad-based,” and added that, “the extended period of low interest rates and continued strong growth in construction sector activity have supported recovery.” Moreover, the Bank underlined that the rapid increase in immigration over the past 18 months has provided a boost to housing and private consumption. Regarding price developments, the Central Bank underlined that although the strong exchange rate has helped to keep inflation low, “inflationary pressures are increasing and are expected to continue doing so over the next two years.” Although the RBNZ did not explicitly signal another increase in April, monetary authorities stated that increases in the monetary policy rate are likely in the coming months and that the OCR may rise by a total of 125 basis points this year. Accordingly, the majority of FocusEconomics panelists expect the Bank to raise the Official Cash Rate this year, with an average forecast of 3.45%. For 2015, participants see interest rates ending the year at 4.00%.

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New Zealand Monetary Policy Chart

New Zealand Monetary Policy March 2014

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

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