The Reserve Bank of New Zealand (RBNZ) has announced this Wednesday that it is keeping its interest rates unchanged in the 5.5%, as expected. After raising them to this level at its May meeting, the entity has not changed its rates in the last two meetings, in July and August.
RBNZ statement
He current level of interest rates is restricting spending and therefore inflationary pressure, as anticipated and required. He Committee agreed that OCR should remain at restrictive levels for the foreseeable future to ensure annual consumer price inflation returns to the 1-3% target range, while supporting maximum sustainable employment.
The New Zealand economy is performing broadly as anticipated. Activity continues to slow in parts of the economy that are more sensitive to interest rates. Labor shortages are easing as overall demand weakens and immigration adds to labor resources. Headline inflation and inflation expectations have declined, but measures of core inflation remain too high.
Globally, economic growth remains below trend and headline inflation has eased for most of our trading partners. Core inflation remains high in many countries. Weakening global economic growth is putting downward pressure on New Zealand’s export prices.
The imbalance between demand and supply is moderating in the New Zealand economy. However, a prolonged period of moderate spending growth is still required to better match the supply capacity of the economy and reduce inflationary pressure.
In the short term, there is a risk that measures of activity and inflation will not slow down as much as expected. In the medium term, a further slowdown in global economic demand, particularly in China, could further influence commodity prices and overall New Zealand export earnings.
The Committee is confident that with interest rates remaining at a restrictive level for some time, consumer price inflation will return to its target range of 1-3% per year, while supporting maximum sustainable employment.
Source: Fx Street
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