New Zealand Monetary Policy

New Zealand

New Zealand: Central Bank keeps interest rates unchanged

April 28, 2011

At its 28 April monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) maintained the Official Cash Rate (OCR) at 2.50%, in a decision widely expected by the market. The decision came after the Bank cut the OCR by 50 basis points at its March meeting, in response to the February earthquake. The Bank signalled its intention to maintain rates at these levels until reconstruction efforts have gained momentum, which, by its own forecast, will not be until the first quarter of 2012. In its statement, the Central Bank argued that the outlook for the economy remains uncertain, following February's earthquake. However, the Bank also acknowledged that, despite the heavy disruption in tourism activity and sharp falls in business confidence and consumer spending, economic activity is showing some signs of recovery. In addition, the monetary authorities stated that higher oil prices and recent increases in indirect taxes are adding pressure on inflation. Nevertheless, the Bank remains comfortable with the inflation outlook, as headline inflation is expected to remain within the 2% 1% target inflation rate. The next monetary policy meeting is scheduled for 9 June. The Central Bank currently has an inflation target of 2.0% (1 percentage points). In its March monetary policy statement, monetary officials anticipate inflation to rise to 4.4% in the financial year 2011 (ending in March 2012) and to decline to 2.1% in financial 2012.

Author:, Senior Economist

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