RBNZ keeps rate unchanged as expected at 1.75%


The Reserve Bank of New Zealand (RBNZ) left the Official Cash Rate (OCR) unchanged at 1.75 percent. It also released the quarterly Monetary Policy Statement. 

The RBNZ maintained its forecast for rates to rise in Q2 2019. They see that numerous uncertainties remain in place. Regarding inflation, they see CPI reaching 2% during Q3 2020 (compared to Q2 2018 of the previous statement). Growth forecasts were revised slightly lower. 

The kiwi (NZD) fell across the board as the statement was perceived as dovish. 

Key Quotes from the statement: 

“Global economic growth continues to improve. While global inflation remains subdued, there are some signs of emerging pressures.”

“The exchange rate has firmed since the November Statement, due in large part to a weak US dollar. We assume the trade weighted exchange rate will ease over the projection period.”

“GDP growth eased over the second half of 2017 but is expected to strengthen, driven by accommodative monetary policy, a high terms of trade, government spending and population growth.”

“Compared to the November Statement, the growth profile is weaker in the near term but stronger in the medium term.”

“House price inflation has increased somewhat over the past few months but housing credit growth continues to moderate.”

“Overall, CPI inflation is forecast to trend upwards towards the midpoint of the target range. Longer-term inflation expectations are well anchored at 2 percent.”

“Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.”

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