The Reserve Bank of New Zealand’s (RBNZ) May meeting’s minutes reveals that the board members remain concerned about the country’s labor market.
Key takeaways
Economic activity in New Zealand has returned to close to its pre-COVID-19 level.
Medium-term outlook for growth remains similar to the scenario presented in the February statement.
Committee agreed on the need for caution as domestic activity remains uneven across sectors of the economy.
Economy is experiencing pockets of both labour shortages and employment slack.
Current level of employment remains below their estimates of the maximum sustainable level but expect it to converge to that level over time.
Expect to see wage growth lift as firms compete for labor.
The Committee noted that on current projections the OCR eventually increases over the medium term, but agreed that this is conditional on the economic outlook evolving broadly as anticipated.
Weekly changes in the LSAP purchases do not represent a change in monetary policy stance
Risks to medium-term inflation were mitigated by ongoing global spare capacity and well-anchored inflation expectations.
LSAP programme could not reach the $100bn limit by June 2022.
Members reinforced their preference to maintain the current level of monetary stimulus until they were confident that the inflation and employment objectives would be met
Agreed this would require considerable time and patience.
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