‘It appears that the bank isn’t too perturbed by the rally in the currency given that export prices have also risen.’ — Zoe Wallis, Kiwibank
The Reserve Bank of New Zealand held its policy and interest rates unchanged at its meeting on Thursday, stating it would unlikely change its stance in the near future. Policymakers voted to leave the benchmark rate at a record low of 1.75% and keep the Bank’s monetary policy accommodative for ‘a considerable period’ amid high uncertainties. According to the RBNZ, interest rates are set to remain unchanged until late 2019 despite the fact that inflation returned to its 1-3% target range. Even though inflation hit 2.2% in the three-month period to March, policymakers said that the following inflation pickup was triggered by temporary factors. However, the Bank suggested that pay and non-tradables inflation would likely improve in the upcoming months. The RBNZ Governor Graeme Wheeler said that the Kiwi’s recent gains were driven mainly by higher export prices. Nevertheless, the Governor noted that the weaker New Zealand Dollar would help to rebalance the growth outlook towards the tradable sector. Despite the weak March quarter performance, the Bank expressed optimism over the economic outlook for New Zealand.
