New Zealand Monetary Policy November 2017

New Zealand

New Zealand: RBNZ keeps key rate unchanged in November

November 9, 2017

At its meeting on 9 November, the Reserve Bank of New Zealand (RBNZ) met market analysts’ expectations and kept the Official Cash Rate (OCR) unchanged at a record-low 1.75%, where it has been since November 2016.

The Central Bank’s latest decision came soon after the Statistical Institute revealed that inflation ticked up in Q3 towards the midpoint of the Bank’s 1.0%–3.0% target range. However, the performance of underlying inflation was weaker, and Q3’s inflation figure was artificially boosted by a new pay settlement for workers in the health sector. On the demand side, the Central Bank judged that the economy is currently growing at roughly its potential rate, and risks of overheating were not apparent. Although the unemployment rate dipped in Q3, wage pressures remain subdued, which has been reflected in recent moderate inflation readings. In order to ensure inflation doesn’t settle below the midpoint of the target range, and to continue to support economic growth, the RBNZ opted to stay put.

In its communiqué, the Bank highlighted heightened uncertainty regarding future domestic economic developments, as it is still far from clear how the policies of the new Labour-NZ First coalition government will affect the outlook for inflation. In its projection, the RBNZ expects inflation to rise back to the central 2.0% target by FY 2019, which matches FocusEconomics Consensus Forecast panelists’ forecasts. In this scenario, the Central Bank is likely to gradually begin tightening rates next year.

FocusEconomics panelists expect that the OCR will end 2018 at 1.92% and 2019 at 2.43%.


Author:, Economist

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New Zealand Monetary Policy Chart


NewZealand Monetary Policy November 2017 1

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


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