In a Bloomberg TV interview, RBNZ Governor Adrian Orr indicated that a forthcoming mild recession is the “bare minium” for New Zealand, as “demand has been well outstripping the pace of the supply capacity.”
“We need to see subdued consumer spending, business investment and government constraints on spending, these are a critical part of the inflation process,” he added.
Orr also reiterated that interest rate will need to stay high for a period of time, as “we don’t feel a rush to be changing rates anytime soon.”
“We believe if we stay where we are for long enough, inflation will be back inside the target band mid-next year and, and stay there,” he added.
RBNZ projects OCR to peak at 5.59% in mid-2024, then retract slightly to 5.36% by early 2025. This suggests rate cuts might be off the table for about 18 months. Orr clarified that these figures are projections and “signal or constraint.”
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