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RBNZ keeps rates on hold, says policy to remain restrictive

Published 10/04/2024, 03:18
© Reuters.

Investing.com-- The Reserve Bank of New Zealand left interest rates unchanged as widely expected on Wednesday, and reiterated that monetary policy will remain restrictive to further reduce pressure from inflation. 

The RBNZ kept its official cash rate at 5.5%, in line with market expectations. Wednesday marked the sixth consecutive meeting where the RBNZ has kept rates unchanged after a 25 basis point hike in May 2023. 

The central bank said in an announcement that with inflation still remaining well above its 1% to 3% target range, it will continue to keep policy restrictive in the near-term.

The RBNZ largely maintained its stance from its February meeting, in that it no longer flagged the possibility of more interest rate hikes. The bank reiterated that it did see some declines in inflation amid high interest rates. 

"A further decline in capacity pressure is expected, supporting an ongoing decline in inflation. The (Monetary Policy) Committee agreed that interest rates need to remain at a restrictive level for a sustained period to ensure annual consumer price inflation returns to the 1 to 3 percent target range," the RBNZ said in an announcement.

Consumer price index inflation had fallen to an annual rate of 4.7% in the three months to December 31, 2023, easing from highs hit in 2022 but remaining well above the RBNZ’s target range.

The central bank had forecast that inflation will only come within its target by the third quarter of 2023.

The RBNZ was the first major global central bank to begin hiking interest rates in the aftermath of the COVID-19 pandemic. It had begun a hiking cycle in mid-2021.

But its efforts were stymied by persistently high services inflation in New Zealand. Rebuilding efforts in the wake of two devastating cyclones in 2023 also factored into higher inflation.

The New Zealand dollar moved little after the RBNZ decision, given that it largely reiterated the bank's messaging from its prior meeting.

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