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New Zealand Monetary Policy April 2024

New Zealand: RBNZ stands pat again in April

At its 10 April meeting, the Reserve Bank of New Zealand (RBNZ) left the official cash rate (OCR) unchanged at 5.50%, as markets had anticipated. The Bank hiked rates by a cumulative 525 basis points between October 2021 and May 2023—its most aggressive hiking cycle since 1999—but has since held them steady.

The Bank decided to stand pat as inflation stayed above its 1.0-3.0% target range, while pricing intentions and inflation expectations remained elevated. The RBNZ said that “there remains limited tolerance to increase the time to achieve the inflation target”, which prompted it to stick to a restrictive monetary policy stance.

Looking forward, the Bank stated that it will maintain “OCR at a restrictive level for a sustained period” to ensure inflation returns to the Bank’s tolerance band by the end of this year. Our panelists expect rates to be reduced ahead this year as inflation moderates further from current levels.

The next monetary policy meeting is scheduled for 22 May.

Commenting on the outlook, Lee Sue Ann, economist at UOB, stated:

“We continue to believe that the RBNZ may have to resort to rate cuts much sooner than its own guidance to begin lowering rates only in the first half of 2025. Our view is for gradual rate cuts beginning in Q3 2024, with factors, such as capacity pressures, inflation expectations, and wage growth, crucial as the basis for RBNZ’s monetary policy.”

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