New Zealand Central Bank Keeps Rate On Hold
(RTTNews) - New Zealand's central bank maintained its benchmark rate as widely expected on Wednesday and softened its hawkish stance as inflation is forecast to return to the target range over the second half of the year.
The Monetary Policy Committee of the Reserve Bank of New Zealand decided to hold the Official Cash Rate at 5.50 percent.
Policymakers said some domestically generated price pressures remain strong but there are signs inflation persistence will ease in line with the fall in capacity pressures and business pricing intentions.
The committee observed that restrictive monetary policy has significantly reduced consumer price inflation.
Members also agreed that there is now more evidence of excess productive capacity emerging, with measures of capacity utilization and difficulty finding labor easing materially. There were signals of declining activity.
The committee discussed the risk that tight monetary policy is feeding through to domestic demand more strongly than expected.
The MPC agreed that monetary policy will need to remain restrictive. The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures.
With the third quarter inflation data likely to show inflation back in the target range, it seems likely a policy pivot in November would be a no brainer for the central bank, said Capital Economics' economist Abhijit Surya.
The RBNZ is expected to cut interest rates more aggressively, with a terminal OCR of 3.50 percent at the end of 2025, said Surya.
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