New Zealand: RBNZ stays put in September
At its 27 September meeting, the Reserve Bank of New Zealand (RBNZ) left the official cash rate (OCR) unchanged at a record-low 1.75%, where it has been since November 2016. The decision came broadly in line with what market analysts had expected. This was the fourth monetary policy meeting incorporating the broadened mandate of supporting maximum sustainable employment and achieving price stability.
The RBNZ’s decision was taken against a backdrop of solid economic growth and inflation remaining below the 2.0% target. Despite GDP growth accelerating to a two-year high in Q2, inflation remains somewhat subdued, which led the Bank to assess that further supportive policy was required. Looking ahead, the Bank expects growth to pick up in the coming year, which, coupled with rising capacity pressures, should assist inflation to return gradually to target.
In terms of forward guidance, the communique maintained key phrases such as the Bank expects “to keep the OCR at this level through 2019 and into 2020” and “keep the OCR at an expansionary level for a considerable period”. Nevertheless, it displayed a slightly more dovish tilt compared to August’s statement. Although seeing strengthening activity ahead, the Bank placed marked emphasis on the downside risks to the outlook—signaling that if growth falls short of expectations, a rate cut could be possible.
The next monetary policy meeting is scheduled for 8 November.