New Zealand Monetary Policy

New Zealand

New Zealand: Reserve Bank of New Zealand leaves OCR on hold

September 11, 2014

At its 11 September monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) unchanged at 3.50%. This represents the first pause in the interest rate tightening cycle after four consecutive rate hikes.

While the RBNZ reiterated in the accompanying statement that it expects the country to post solid economic growth, its stance on the inflation outlook has changed against the background of recent low inflation figures. Monetary authorities noted that GDP is expected to grow 3.7% in 2014. The Bank underlined that continued growth in the domestic construction sector and in consumption and investment is supportive to growth. Increasing net immigration is expected to boost demand and productive capacity. Nevertheless, export growth is expected to slow down because of falling commodity prices and the tighter monetary policy stance that has been adopted in recent months.

Regarding price developments, the Bank pointed out that, “[t]he economy appears to be adjusting to the policy measures taken by the Bank over the past year.” According to RBNZ, inflation remains moderate and reflects low wage increases, low global inflation and the strength of the New Zealand dollar. Furthermore, the Bank said that house price inflation is receding. However, RBNZ pointed out several uncertainties in the inflation outlook. In addition, the Bank said that the current exchange rate level was “unjustified and unsustainable” and it expects a notable depreciation.

The RBNZ signaled that it might extend the pause to the interest rate tightening cycle in stating that, “it is prudent to undertake a period of monitoring and assessment before considering further policy adjustment.” The next monetary policy meeting is scheduled for 30 October.

FocusEconomics panelists expect that the OCR will end this year at 3.68%. For 2015, participants see interest rate ending the year at 4.25%.


Author: Teresa Kersting, Economist

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New Zealand Monetary Policy Chart


New Zealand Monetary Policy September 2014

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


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