The Reserve Bank of NZ has left its key Official Cash Rate (OCR) steady at 1.75% and says it expects to maintain this level for at least the next two years.
In a statement following the decision on Wednesday, the central bank said: “the direction of our next OCR move could be up or down.”
“We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation,“ the RBNZ said.
Its stance is subtly different to the new stance adopted by the Reserve Bank of Australia last week which moved from a ’steady as she goes, but the next rate move is up’, to one where ‘ the next rate rise could very well be down, and the chances of a rise are very remote.’
If anything the RBNZ stance is a toucher firmer by pointing to the possibility of a rise (or a cut) whereas the RBA is now widely expected to cut rates later this year by more and more commentators.
“Employment is near its maximum sustainable level. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy,” The RBNZ said yesterday.
“Trading-partner growth is expected to further moderate in 2019 and global commodity prices have already softened, reducing the tailwind that New Zealand economic activity has benefited from. The risk of a sharper downturn in trading-partner growth has also heightened over recent months.
“Despite the weaker global impetus, we expect low-interest rates and government spending to support a pick-up in New Zealand’s GDP growth over 2019. Low-interest rates and continued employment growth should support household spending and business investment. Government spending on infrastructure and housing also supports domestic demand.
“As capacity pressures build, consumer price inflation is expected to rise to around the mid-point of our target range at 2 percent.
“There are upside and downside risks to this outlook. A more pronounced global downturn could weigh on domestic demand, but inflation could rise faster if firms pass on cost increases to prices to a greater extent.”