RBNZ holds OCR steady, no room for delay in bring down inflation to target band

RBNZ maintained Official Cash Rate unchanged at 5.50%, aligning with market expectations. This decision comes with reiterated commitment to “restrictive monetary policy stance,” deemed necessary to alleviate capacity pressures and guide inflation back within the target range of 1 to 3 percent within “this calendar year”.

During the recent meeting, members concurred that there has been “no material change in economic outlook” since their February Statement. There remains a “limited tolerance” for prolonging the timeframe to meet the inflation target, especially with inflation expectations and pricing intentions continuing to “remain elevated”.

The “persistence of services inflation” and “elevated” goods price inflation were identified as continuous risks, with expected near-term increases in local government rates, insurance, and utility costs potentially decelerating the reduction in headline inflation.

On the flip side, RBNZ acknowledges potential downside risks to the inflation outlook, notably the impact of continued restrictive monetary policy amid weak global growth. This environment could precipitate a quicker than anticipated reduction in inflation. Weak business and consumer confidence, coupled with potential increases in unemployment and financial stress, are areas of concern. Additionally, structural economic challenges in China are highlighted as significant, given its critical role in the global economy and as a major trading partner for New Zealand.

Full RBNZ statement here.