In his address to the parliament’s finance and expenditure committee, RBNZ Governor Adrian Orr noted that the country’s interest rates are already significantly above neutral, thereby suppressing spending and investment.
“They (interest rates) are well above what we would consider neutral, are constraining spending and investment,” Orr said. He further stated, “The committee is confident monetary policy is restrictive and doing its job.”
Orr characterized yesterday’s 25bps rate hike as “an extra bit of insurance.” The RBNZ committee voted five to two in favor of raising the OCR with two dissenting votes advocating for holding. Orr was quick to downplay any notion of discord within the committee. “On the division in the committee, the voting, there is no division. It’s a committee decision,” he told the parliamentary committee.
Looking forward, Orr hinted that the RBNZ might start easing interest rates in early next year. “The committee expects the OCR to remain steady until early next year. At that point, we may be able to start easing interest rates,” he noted.
