New Zealand Monetary Policy January 2016

New Zealand

New Zealand: Central Bank keeps official cash rate unchanged at 2.50%

January 28, 2016

At its 28 January monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) at 2.50%. The RBNZ had cut the cash rate in its four previous meetings and this signals a break in its easing policy.

Regarding the international environment, the Central Bank noted that uncertainty about global economic growth has increased as developing countries are registering weaker growth. In addition, commodity prices remain weak, global inflation is subdued and financial market volatility has increased.

Regarding the domestic economy, the Central Bank emphasized that growth softened during H1 2015 due in large part to deteriorated terms of trade. However, growth in tourism, increased construction activity and higher confidence levels are expected to boost the economy in 2016.

The Central Bank expects that inflation will increase and fall within the 1%–3% target range in 2016, although the Bank sees this occurring at a slower pace than previously forecast. The RNBZ will thus keep its monetary policy accommodative.

While the RBNZ decided to keep its official cash rate at 2.50%, the Central Bank added that, “some further policy easing may be required over the coming year to ensure that future average inflation settles near the middle of the target range.” The next monetary policy meeting is scheduled for 10 March.

FocusEconomics panelists expect that the OCR will end 2016 at 2.43%. For 2017, participants see the interest rate ending the year at 3.18%.


Author:, Economist

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New Zealand Monetary Policy January 2016 0

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


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