Summary:
- RBNZ’s June monetary policy meeting saw no changes to the OCR, which remains steady at 1.75%
- RBNZ leaves forecasts unchanged from the May policy meeting
- Expects further cooling in home prices
- Inflation expected to remain soft on weaker energy prices
- Notes that a weaker exchange rate could help to rebalance growth
- RBNZ maintains OCR to remain unchanged until late 2019
The Reserve Bank of New Zealand met for its monetary policy meeting late yesterday. As widely expected, the central bank left the key interest rates unchanged at 1.75% and did not make any major changes to its monetary policy statement.
In its statement, the RBNZ said that its current policy would remain accommodative for a “considerable period†suggesting that the officials were not thinking about hiking interest rates anytime soon.
The statement also cited “significant uncertainties†in the global outlook and said that this could trigger a policy response from the central bank.
In its rate forecast, the RBNZ maintained that interest rates or the Official Cash Rate (OCR) would remain unchanged until late 2019.
The central bank deferred from making any changes to its economic assessment from the May policy meeting. In other words, the central bank maintained its positive outlook on the New Zealand economy.
This was slightly surprising considering that the March quarter GDP was lower than even the RBNZ’s forecasts.
Gross domestic product in New Zealand expanded at a pace of 0.5% in the quarter ending March. The RBNZ projected the GDP growth at 0.9% instead.
The central bank said that despite the weakness in the GDP, the growth outlook was positive. It maintained that with the economy supported by accommodative monetary policy and the recent changes to the national budget, growth would return.
The New Zealand dollar rallied after the RBNZ’s statement which also touched upon the exchange rate. The central bank said that the recent gains in the exchange rate came on account of higher commodity prices.
