‘…the growth outlook remains positive, supported by on-going accommodative monetary policy, strong population growth, and high levels of household spending and construction activity.’ – Reserve Bank of New Zealand
Yet again, the Reserve Bank of New Zealand left its monetary policy unchanged at its May meeting on Wednesday in support of inflation and steady economic growth. The Monetary Policy Committee voted to hold the official cash rate at a record low of 1.75%, where it has stood since November last year, satisfying market analysts who are eyeing a gradual tightening beginning not earlier than at the start of 2018. In the May statement, the RBNZ highlighted that the monetary policy is likely to remain accommodative until late 2019, however, economists worldwide argued that this would be difficult to justify, as inflation continues to spike up. The CPI was up 2.2% in the Q1 of 2017, much higher than the 1.5% projected by the Central Bank. Since 2011, it was the first time when the RBNZ has reached the mid-point if its inflation target range of 1-3%. Meanwhile, data released last week suggested long-run inflation expectations across the business sector also inched higher in the first quarter. Overall, the RBNZ Governor Graeme Wheeler remained upbeat on the country’s economic outlook, though still warned that major challenges remain emplace.
