New Zealand Monetary Policy

New Zealand

New Zealand: Central Bank keeps rates unchanged but becomes more hawkish

July 25, 2013

At its 25 July monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) left the official cash rate (OCR) unchanged at its record low of 2.50%. The Central Bank has not changed the rate since March 2011.

The global outlook remains mixed, according to monetary authorities. The Eurozone is mired in a deep recession and growth in Asia is starting to slow down. Recent data in the United States and Japan, however, suggest improving growth prospects in the coming months. The RBNZ also stated that growth in New Zealand is picking up; consumer spending is increasing and earthquake-related reconstruction activity in Canterbury is gaining speed.

Monetary officials pointed out that the New Zealand dollar stabilized in recent weeks although it is still high and continues to act as a headwind for exports. In addition, the Central Bank stated that inflation remains below its target (1% - 3%), owing mainly to the strong New Zealand dollar. As growth accelerates in the coming months, the Bank expects inflation to increase and resume a position within its 1% to 3% target.

The Central Bank's statement contained a significant change in its stance on monetary policy. From December 2011 to June 2013, the Bank's tone in monetary policy texts was dovish. In its 25 July statement, however, the Bank claims that while it expects "to keep to the OCR unchanged through the end of the year", it said that a "removal of monetary policy stimulus will likely be needed in the future".

A majority of FocusEconomics panellists expect the Bank to maintain the official cash rate stable this year, with an average forecast of 2.58%. For 2014, participants see interest rates ending the year at 3.31%.

Author:, Senior Economist

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New Zealand Monetary Policy Chart

New Zealand Monetary Policy July 2013

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

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