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New Zealand Monetary Policy July 2023

New Zealand: RBNZ stands pat in July, but no rate cut in sight

At its 12 July meeting, the Reserve Bank of New Zealand (RBNZ) left the official cash rate (OCR) unchanged at 5.50%. The decision followed 12 consecutive hikes—a cumulative increase of 525 basis points in the OCR since October 2021. The last meeting at which the Bank failed to hike was in August 2021.

The Bank’s decision came amid softening inflation, as previous monetary policy tightening is already cooling demand dynamics. Moreover, net migration is helping to reduce price pressures by easing labor shortages. The RBNZ now projects the OCR to remain at its current, restrictive level “for the foreseeable future”.

Looking forward, the Bank said in a statement that it “is confident that, with interest rates remaining at a restrictive level for some time, consumer price inflation will return to within its target range of 1 to 3% per annum”.

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

“We are keeping our OCR forecast at 5.50% for the rest of this year, though bearing in mind that the RBNZ has paused in previous tightening cycles before hiking again. […] A pause is not necessarily a peak, and economic data will dictate the path going forward.”

The next monetary policy meeting is scheduled for 16 August.

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