The Reserve Bank of New Zealand (RBNZ) left its official cash rate (OCR) without change at 5.5% at its October policy meeting, in line with market expectations.
This way, the central bank extended the rate pause for a third consecutive meeting.
Policy makers continued to uphold the view that monetary conditions were restraining spending and reducing cost pressure after a total of 525 basis points of rate hikes since October 2021.
The RBNZ Board noted that the OCR would need to stay at a restrictive level to ensure that annual consumer price inflation is brought back within the 1% to 3% target range by the second half of 2024.
Policy makers again said there was a near-term risk that activity and inflation would not slow as much as anticipated amid several factors, including a surge in oil prices.
The RBNZ also highlighted that New Zealand’s growth outlook remained subdued regardless of stronger-than-anticipated second-quarter GDP figures.
“The bank appears content to wait for restrictive policy settings to fully feed through to the real economy,” Abhijit Surya, economist at Capital Economics, was quoted as saying by Reuters.
“We’re sticking with our view that, barring any major upside surprise in incoming data, the RBNZ’s tightening cycle is over. However, policy is likely to remain restrictive for a prolonged period, with rate cuts only in Q3 2024.”
The New Zealand Dollar was last losing 0.33% on the day against its US counterpart, with the NZD/USD currency pair trading at 0.5889. Earlier in the session, the major Forex pair slipped as low as 0.5871, or its weakest level since September 8th.
Additionally, a surge in US Treasury yields and a strong US Dollar were pressuring the kiwi, after another set of robust macro data reinforced prospects that the Federal Reserve will likely maintain interest rates elevated for an extended period.
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