The Reserve Bank of New Zealand keeps interest rates at 5.5% for the fourth consecutive meeting

He The Reserve Bank of New Zealand (RBNZ) has decided to keep its interest rates unchanged at 5.5% at its November monetary policy meeting, as expected. This is the fourth consecutive meeting that the RBNZ has left rates unchanged, after last raising rates by 25 basis points last May.

RBNZ statement

Interest rates are constraining spending in the economy and consumer price inflation is declining, as is necessary to fulfill the Committee’s mandate. However, inflation is still too high and the Committee remains cautious in the face of current inflationary pressures.

Internationally, economic growth has been stronger than expected earlier this year, but remains below trend and is likely to slow further. This weak growth outlook will continue to limit New Zealand’s export earnings.

In New Zealand, demand growth has slowed, but less than expected during the first half of 2023, partly due to strong population growth. The OCR interest rate should remain restrictive, so that demand growth remains moderate and inflation returns to the target range of 1% to 3%.

Wage growth has softened from recent highs. Demand for labor is weakening and job postings are now below pre-COVID-19 levels. At the same time, strong internal migration is increasing the population and increasing labor supply.

While population growth has eased supply constraints, the effects on aggregate demand are becoming evident. This is increasing the risk that inflation will remain above target.

The Committee is confident that the current level of OCR is restraining demand. However, persistent excess demand and inflationary pressures are a cause for concern, given the high level of underlying inflation. If inflationary pressures were stronger than expected, the OCR would probably have to rise even further.ace.

The Monetary Policy Committee agreed that Interest rates must remain at a restrictive level for a sustained period of time.po, so that consumer price inflation returns to its target and supports maximum sustainable employment.