HomeContributorsFundamental AnalysisRBNZ Holds Benchmark Rate At Record Low Of 1.75%

RBNZ Holds Benchmark Rate At Record Low Of 1.75%

‘The RBNZ continues to see an outlook shaped by considerable uncertainty and is in no hurry to alter policy in either direction as a result. There is no change to our view. We continue to see the next move in the OCR being up, but not until mid-2018.’ – Cameron Bagrie and Philip Borkin, ANZ Bank New Zealand

As markets expected, the Reserve Bank of New Zealand left its monetary policy unchanged at its March meeting on Wednesday amid high global uncertainties. The RBNZ Governor Graeme Wheeler said that policymakers would keep monetary policy loose for an extended period of time, as it might need to be adjusted in light of existing uncertainties coming mainly from the US and Europe. On Wednesday, the Monetary Policy Committee voted to hold the official cash rate at a record low of 1.75%, claiming that the current global situation was preventing inflation from reaching the Bank’s target. Moreover, Wheeler said that the inflation rate would probably remain below 2% until 2019. However, some analysts suggest that inflation will reach 2% already this quarter and borrowing costs will start growing within a year. Wheeler noted that a 4% drop in the value of the Kiwi since February was ‘encouraging’ but added that further depreciation of it was necessary to ‘achieve more balanced growth’. Back in the Q4 of 2016, New Zealand’s economy expanded at a slower-than-expected pace, forcing the RNBZ to review its 2017 growth forecast. Thus, according to the Bank, annual economic growth is unlikely to rise above 3.5% this year.

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