The Reserve Bank has left the official cash rate or OCR at 1.75 percent for the tenth consecutive decision. In a statement this morning the RBNZ said it expected the rate to stay at 1.75 percent for “some time to come”, with the risks of either cuts or increases evenly balanced.
The Bank’s Monetary Policy Statement, also released today has pushed out its projection for when the Bank would raise the OCR to September 2019. The last MPS, delivered in February, projected a rate rise in June 2019.
This is the first interest rate decision by Reserve Bank Governor Adrian Orr, the former chief of the New Zealand Superannuation Fund. It is also the first OCR decision to take into account the new Government’s widened mandate for the Reserve Bank.
The Policy Targets Agreement was signed with Finance Minister Grant Robertson in March, and asked the bank to seek to support “maximum levels of sustainable employment”.
Orr said that while “economic growth and employment in New Zealand remain robust” and “near their sustainable levels… consumer price inflation remains below the 2 percent mid-point of our target”.
The bank has in recent years kept inflation within its 1 to 3 percent target band, but it has failed to meet its mid-term “mid-point” target of 2 percent.
CPI data from Statistics NZ released last week showed inflation fell to 1.1 percent, at the very bottom of the Reserve Bank’s target range.
“Emerging capacity constraints are projected to see New Zealand’s consumer price inflation gradually rise to our 2 percent annual target,” Orr said.
“To best ensure this outcome, we expect to keep the OCR at this expansionary level for a considerable period of time,” he said.
“This is the best contribution we can make, at this moment, to maximising sustainable employment and maintaining low and stable inflation."
"The direction of our next move is equally balanced, up or down. Only time and events will tell."
Orr will hold his first MPS press conference at 10 am this morning.