The overall RBNZ monetary policy decision is rather dovish. OCR is left unchanged at 1.75% for a 19th straight month as widely expected. Governor Adrian Orr noted in the statement that growth and employment remain “robust” and near their “sustainable levels”. But CPI remains below the 2% mid-point of target. And, the best way to see inflation moving back to target would be “to keep the OCR [overnight cash rate] at this expansionary level for a considerable period of time”. RBNZ is clearly is no rush to raise interest rates.
Adding to that, the GDP growth and inflation forecasts were also downgraded for the period ahead. The downgrade in GDP forecasts were quite significant in 2019 and 2020. CPI is still projected to hit 2.0% target 2021 but is expected to be lower in both 2019 and 2029.
GDP is projected to grow 2.8% (2018), 3.1% (2019), 3.3% (2020), 3.1% (2021). Back in February, GDP projections were 2.9% (2018), 3.3% (2019), 3.5% (2020), 3.1% (2021).
CPI is projected to be at 1.1% (2018, 1.6% (2019), 1.8% (2020), 2.0% (2021). Back in February, CPI projections were 1.1% (2018), 1.7% (2019), 1.8% (2020), 2.0% (2021).
This is May’s forecast summary.
This is February’s forecast summary.
And here is the press conference:
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