RBNZ keeps interest rate unchanged as expected

The board members of the Reserve Bank of New Zealand (RBNZ) opted to keep the Official Cash Rate (OCR) at 5.50% on Wednesday after the end of the April policy meeting. The choice was consistent with what the market anticipated.

The New Zealand Dollar catches a fresh momentum in an immediate reaction to the RBNZ ’s status quo. The NZD/USD pair currently trades around 0.6067, up 0.15% on the day.

RBNZ Interest Rate Meeting Minutes:

Members agreed they remain confident that monetary policy is restricting demand.

Restrictive monetary policy is contributing to an easing in capacity pressures to ensure inflation returns to target.

Further decline in capacity pressure is expected, supporting an ongoing decline in inflation.

Members agreed they remain confident that monetary policy is restricting demand.

Measures of business confidence have declined and firms’ own expectations for activity and investment have weakened.

Near-term business pricing intentions have declined but remain elevated, in part reflecting an uptick in both realized and expected costs.

Continued strength in net migration, is supporting aggregate consumer spending and rising dwelling costs.

The committee agreed that interest rates need to remain at a restrictive level for a sustained period.

Members agreed that the balance of risks was little changed since the February.

Members agreed that there remains limited tolerance to increase the time to achieve the inflation target while inflation remains outside the target band and while inflation expectations and pricing intentions remain elevated.

Members agreed that persistence of services inflation remains a risk and goods price inflation remains elevated.

Ongoing restrictive monetary policy in an environment of weak global growth could lead to a more rapid decline in inflation than expected.

RBNZ Monetary Policy Statement, Key Quotes:

The New Zealand economy continues to evolve as anticipatedby the monetary policy committee.

A restrictive monetary policy stance remains necessary to further reduce capacity pressures and inflation.

Economic growth in New Zealand remains weak.

Committee is confident that maintaining the OCR at a restrictive level for a sustained period will return consumer price inflation to within the 1 to 3 percent target range this calendar year.