RBNZ leaves cash rate unchanged at 5.5%, as expected

<p>Reserve Bank of New Zealand leaves its cash rate unchanged, as was very widely expected, but insists it'll remain restrictive with inflation still being too high. </p><p>Indeed the track of the OCR from the Bank is slightly higher:</p><ul><li>
Sees official cash rate at 5.63% in March 2024 (prior 5.58%)</li><li>Sees official cash
rate at 5.66% in December 2024 ( prior 5.5%)</li><li>Sees official cash
rate at 5.56% in March 2025 ( prior 5.36%)</li><li>Sees official cash
rate at 3.55% in December 2026</li></ul><p>More:</p><ul><li>Sees NZD TWI at
around 70.7% in December 2024 ( prior 71.0%)</li><li>Sees annual CPI
2.5% by December 2024 ( prior 2.4%)</li></ul><p>More:</p><ul><li>
Interest rates are restricting spending in the economy and consumer
price inflation is declining, as is necessary to meet the
committee's remit.</li><li>Interest rates will
need to remain at a restricted level for a sustained period of time</li><li>However, inflation
remains too high, and the committee remains wary of ongoing
inflationary pressures</li><li>Demand growth has
eased, but by less than anticipated over the first half of 2023 in
part due to strong population growth</li><li>The committee is
confident that the current level of the OCR is restricting demand</li><li>The OCR will need
to stay restrictive, so demand growth remains subdued, and inflation
returns to the 1 to 3 percent target range</li><li>If inflationary
pressures were to be stronger than anticipated, the OCR would likely
need to increase further</li></ul><p>Bolding above is mine. The Bank seems happy with the rate where it is but is not ruing out further hikes. </p><p>From the minutes of the meeting:</p><ul><li>
Committee agreed that interest rates will need to remain at a
restrictive level for longer</li><li>Members agreed they
remain confident that monetary policy is restricting demand</li><li>Ongoing excess
demand and inflationary pressures were of concern, given high core
inflation</li><li>Members discussed
the possibility of the need for increases to the OCR</li><li>Members agreed that
with interest rates already restrictive, it was appropriate to wait
for further data and information</li><li>Members agreed that
monetary policy was supportive of sustainable house prices</li><li>Pressure in the
labour market is easing, although employment remains above its
maximum sustainable level</li><li>Members also noted
that most major central banks have indicated that they intend to
retain current restrictive policy rates for longer, and are willing
to tighten further, if required</li><li>While growth in
parts of the economy is slowing, there has been less of a decline in
aggregate demand growth than expected earlier in the year</li><li>Committee noted that
the estimate of the long-run nominal neutral OCR has increased by 25
basis points to 2.50%</li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.