Reserve Bank of New Zealand

May 11, 2017

As they did at the first two policy reviews of 2017, monetary officials left New Zealand’s official cash rate unchanged at 1.75%, the level reached after a 25-basis point cut at the final meeting of 2016. In all, three 25-bp cuts were engineered in 2016 following four such moves between June and December of 2015. The OCR was twice it’s current level when this easing cycle began.

A statement released today by Governor Wheeler concludes that monetary policy is likely to remain accommodative over a considerably longer period. An acceleration of headline inflation last quarter mainly reflected special factors related to food and fuel import costs, factors that are not projected to endure. Expectations of longer term inflation remain well-anchored, and housing prices are moderating. A 5% drop of the kiwi since February played a role in raising inflation but on balance is welcomed because it will promote the needed adjustment of New Zealand’s economy. Inflation among tradeable goods and wage growth are each only moderate, and growth in the second half of 2016 was somewhat less than expected.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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