Reserve Bank of New Zealand leaves cash rate on hold at 5.5%, as widely expected

Reserve Bank of New Zealand

The Bank sees the cash rate ahead at:

• 5.61% in September 2024 (prior 5.6%)
• 5.54% in June 2025 (prior 5.33%)
• 5.4% in September 2025 (prior 5.15%)
• 2.99% in June 2027

That 5.4% in September 2025 is a full 25bp higher than its previous forecast.

Forecasts inflation at 2.6% y/y by June 2025.

Statement:

• Monetary policy needs to be restricted
• Restrictive monetary
  policy has reduced capacity pressures in the New Zealand economy and
  lowered consumer price inflation
• Annual consumer
  price inflation is expected to return to within the committee’s 1 to
  3 percent target range by the end of 2024.
• Welcome decline in
  inflation in part reflects lower inflation for goods and services
  imported into New Zealand
• Components of
  domestic services inflation persists
• Wage growth and
  domestic spending are easing
• Weaker capacity
  pressures and an easing labour market are reducing domestic inflation

Minutes:

• Members agreed they remain confident that monetary policy is
  restricting demand
• A further decline in
  capacity pressure is expected, supporting a continued decline in
  inflation
• Committee agreed
  that interest rates need to remain at a restrictive level for a
  sustained period to ensure annual headline cpi inflation returns to
  the 1 to 3 percent target range
• Committee noted that
  annual headline cpi inflation was expected to return to the target
  band in the december quarter of this year
• Domestic inflation
  has fallen more slowly than expected and headline consumers price
  index (cpi) inflation remains above the committee’s target band
• Committee also
  agreed that interest rates may have to remain at a restrictive level
  for longer than anticipated in the february monetary policy statement
  to ensure the inflation target is met
• The committee
  discussed the possibility of increasing the ocr at this meeting

A more hawkish RBNZ, not only suggesting later rate cuts but even a possibility of another hike.

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RBNZ Governor Orr will hold his press conference in an hour.

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Background to this:

And, what’s still to come this week from the Bank: