The Reserve Bank has held the official cash rate unchanged at 5.5 percent for the eighth consecutive meeting, but hinted cuts may be closer than previously thought.

New Zealand’s central bank said the economy has slowed and labour market pressures are easing but pockets of domestic inflation persisted.

“Restrictive monetary policy has significantly reduced consumer price inflation, with the Committee expecting headline inflation to return to within the 1 to 3 percent target range in the second half of this year,” the Monetary Policy Committee said in a statement this afternoon. 

It said annual consumer price inflation remained above the 1 to 3% target band, and monetary policy needed to remain restrictive to ensure inflation returns to target, but dropped previous direct comments about rates needing to stay higher for longer.

“The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures.”

The decision was in line with financial market and analysts’ expectations.

The RBNZ did not issue any updated forecasts, but in May indicated it expected to hold the OCR at 5.5% until after mid-2025.

More to come