New Zealand Monetary Policy

New Zealand

Central Bank maintains OCR rate, remains on track for 2014 hike

At its latest monetary policy meeting of 2013, the Reserve Bank of New Zealand (RBNZ) decided to maintain the official cash rate (OCR) at the record low of 2.50%. The decision was on par with market expectations.

In its accompanying statement, the RBNZ acknowledged that considerable economic momentum persists continues due to rising household consumption and increasing reconstruction activity in Canterbury and across the country. Regarding price developments, the Bank pointed out that inflation accelerated in the third quarter and that consumer prices are expected to rise further. The Bank, however, acknowledged that the timing of such pressures will depend on developments in the exchange rate and commodity prices.

There was no substantial change to December's Monetary Policy Statement (MPS) compared to that of October. The RBNZ's main message was that an increase in the OCR will be necessary next year, but that the exact timing and extent of the hike cycle will depend on the degree to which the buoyant housing market and the 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 2.50%. For 2014, participants see interest rates ending the year at 3.35%.

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New Zealand Monetary Policy Chart

New Zealand Monetary Policy December 2013

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

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