New Zealand Monetary Policy

New Zealand

New Zealand: Reserve Bank leaves interest rates unaltered

July 28, 2011

At its latest monetary policy meeting held on 28 July, the Reserve Bank of New Zealand (RBNZ) maintained the official cash rate (OCR) at 2.50%, in a decision widely expected by the market. The outcome came after monetary authorities left the policy rate unchanged at the June meeting. In its statement, the RBNZ argued that ?the economy has grown more strongly than was expected and it appears that the recovery is getting back on track.? However, the Bank believes that the fragility in global markets and the uncertainty over the U.S. economy present notable downside risks. Monetary authorities acknowledged that inflation remains elevated and above the Central Bank's 2.0% 1.0% inflation target. However, monetary officials claimed that ?much of the current spike in inflation has been driven by the October 2010 increase in the goods and services tax (GST), and will therefore be temporary.? That said, the Central Bank used a more hawkish tone in its July statement, indicating that it will remove the current accommodative stance. The next monetary policy meeting is scheduled for 15 September.

Author:, Senior Economist

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