New Zealand Leaves Interest Rate at 1.75%


The Reserve Bank of New Zealand kept its official cash rate unchanged at record low of 1.75 percent on 10 May 2018, as widely expected. The central bank last moved the key rate in November of 2016. Policymakers underscored that consumer price inflation remains below the 2 percent mid-point of the central bank target due, in part, to recent low food and import price inflation, and subdued wage pressures. They also mentioned that the direction of the next move is equally balanced, up or down. Consumer prices in New Zealand increased 1.1 percent year-on-year in the first three months of 2018 following a 1.6 percent increase in the previous quarter, matching market expectations. It was the slowest inflation since the third quarter of 2016.

Statement by Reserve Bank Governor Adrian Orr:

The Official Cash Rate (OCR) will remain at 1.75 percent for some time to come. The direction of our next move is equally balanced, up or down. Only time and events will tell.

Economic growth and employment in New Zealand remain robust, near their sustainable levels. However, consumer price inflation remains below the 2 percent mid-point of our target due, in part, to recent low food and import price inflation, and subdued wage pressures.

The recent growth in demand has been delivered by an unprecedented increase in employment. The number of willing workers continues to rise, especially with more female and older workers choosing to participate. Likewise net immigration has added to the supply of labour, and the demand for goods, services, and accommodation.
Ahead, global economic growth is forecast to continue supporting demand for New Zealand’s products and services. Global inflation pressures are expected to rise but remain contained.
At home, ongoing spending and investment, by both households and government, is expected to support economic growth and employment demand. Business investment should also increase due to emerging capacity constraints.

The emerging capacity constraints are projected to see New Zealand’s consumer price inflation gradually rise to our 2 percent annual target.

To best ensure this outcome, we expect to keep the OCR at this expansionary level for a considerable period of time. This is the best contribution we can make, at this moment, to maximising sustainable employment and maintaining low and stable inflation.

Our economic projections, assumptions, and key risks and uncertainties, are elaborated on fully in our Monetary Policy Statement.

New Zealand Leaves Interest Rate at 1.75%


Mario | mario@tradingeconomics.com
5/9/2018 9:09:25 PM