Reserve Bank of New Zealand Keeps Official Cash Rate at 3.5%

April 29, 2015

The OCR has been at 3.5% since a 25-basis point hike last July, but the policy bias is toward easing as attested by this passage from the latest policy statement:

The Bank expects to keep monetary policy stimulatory, and is not currently considering any increase in interest rates.

We are watching closely the ongoing impact on tradables inflation from global forces and the high New Zealand dollar.  On a trade-weighted basis, the New Zealand dollar continues to be unjustifiably high and unsustainable in terms of New Zealand’s long-term economic fundamentals.   The appreciation in the exchange rate, while our key export prices have been falling, is unwelcome.

The timing of future adjustments in the OCR will depend on how inflationary pressures evolve in both the non-traded and traded sectors.  It would be appropriate to lower the OCR if demand weakens, and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target.

The next policy meeting is scheduled for June 17.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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