By Gyles Beckford of RNZ
The Reserve Bank has paused its 11- month rate-cutting programme and held the official cash rate (OCR) unchanged at 3.25 percent as it waits for more clarity about the state of the local economy and global trade.
The move to the sidelines was expected by economists and financial markets after the RBNZ had aggressively cut rates at six consecutive meetings from its peak of 5.5 percent in August last year to its current level last month.
The central bank said it was appropriate to pause as it waited for more data on inflation and the local jobs market, and more detail on the impact of US tariffs.
“The economic outlook remains highly uncertain. Further data on the speed of New Zealand’s economic recovery, the persistence of inflation, and the impacts of tariffs will influence the future path of the Official Cash Rate.,” the Monetary Policy Committee (MPC) said in a statement.
The MPC said the economy was being supported strong export prices and lower interest rates, but tariffs were expected to affect global growth and and the the recovery of the New Zealand with it.
It repeated the recent strengthening of inflation was expected to be temporary with the underlying rate expected back in the middle of the 1-3 percent target band by early next year.
The committee said further cuts to the OCR were on the cards.
“If medium-term inflation pressures continue to ease as projected, the Committee expects to lower the Official Cash Rate further,” adding the guidance given in May still stood.
That guidance implied no more than two further cuts.
Economists opinion is divided on the next move, with most expecting at least one more cut to 3.0 percent, most likely in August, and a minority forecasting cuts to as low at 2.5 percent by early next year.
Unlike the previous meeting, when the committee had a split vote on the decision to cut, the latest decision was agreed by all.
During a press conference on Wednesday afternoon, David Seymour said he had no doubt the Reserve Bank would be looking at international figures.
“I think there’s been concern about headline inflation around the world.”
