New Zealand Keeps Rate On Hold

(RTTNews) - New Zealand's central bank left the benchmark interest rate unchanged for the fifth straight meeting, as widely expected, on Wednesday and suggested that the rate will remain tight for a sustained period of time.

The Monetary Policy Committee of the Reserve Bank of New Zealand, governed by Adrian Orr, decided to hold the Official Cash Rate at 5.50 percent.

The bank had raised its policy rate sharply from 0.25 percent since October 2021.

Policymakers said that interest rates need to remain at a restrictive level for a sustained period of time to ensure that inflation returns to the target range.

The MPC noted that risks to the outlook for inflation were more balanced than at the time of the November 2023 statement.

Although inflation eased to 4.7 percent in the fourth quarter of 2023, it remained well above the 1-3 percent target band.

The committee observed that aggregate demand is better matched with the supply capacity of the economy.

Capital Economics' economist Abhijit Surya expects headline inflation to reach the top of the central bank's target band by the second half itself, which should allow the RBNZ to start cutting rates from its August meeting.

The economist noted that markets are pricing in the first reduction only in November and the central bank is signaling rate cuts only in early 2025.