The Reserve Bank of New Zealand's Monetary Policy Committee has left the official cash rate unchanged at 5.50 percent for the fourth consecutive meeting, in line with the consensus forecast. Prior to this recent pause, officials had increased policy rates by a cumulative 525 basis points since October 2021 as part of efforts to return inflation to their target range of 1.0 percent to 3.0 percent.

Headline CPI inflation fell to 5.6 percent in the three months to September from 6.0 percent in the three months to June, with core inflation falling from 7.1 percent to 5.8 percent, its lowest level since mid-2021. Officials still expect inflation will decline back to the target range in the second half of 2024, but the statement accompanying today's decision again highlights risks that price pressures will not slow as much as expected. The statement also notes that previous policy tightening is continuing to constrain domestic spending, with officials forecasting GDP growth to remain subdued in coming quarters.

Reflecting this assessment, officials discussed the possibility that further rate increases would be required, with some arguing that"there should be a low tolerance for any increase in the time to return inflation to target". Officials agreed, however, that policy rates are already sufficiently restrictive and that it was appropriate to wait for further information before adjusting policy settings. Nevertheless, it also appears that they retain a bias to tighten further if inflation does not fall as quickly as they anticipate.

The Reserve Bank of New Zealand has kept policy steady at its last three meetings
Though inflation remains stubbornly high, consensus for November's meeting is no change at 5.50 percent.

Meeting at roughly six week intervals, the Reserve Bank of New Zealand meets and decides whether to change or maintain New Zealand's Official Cash Rate. The RBNZ is known for its clarity regarding monetary policy intentions, thus the result is usually foreseen in advance. The decision aligns with the Reserve Bank of New Zealand's monetary policy to spur or slow economic growth or affect the exchange rate.

The RBNZ maintains an inflationary target range of 1 percent to 3 percent and will change rates to keep it within such a range, making rate decisions fairly predictable. Rate changes are significant nonetheless, affecting interest rates in consumer loans, mortgages, and bond rates. Increases or even expectations for rate increases tend to cause the New Zealand Dollar to appreciate, while rate decreases cause the currency to depreciate.

The RBNZ determines interest rate policy at it policy meetings. These meetings occur roughly every six weeks and are one of the most influential events for the markets. Market participants speculate about the possibility of an interest rate change. However, since the Bank is known for its clarity in setting policy, the result is usually built into the markets in advance. The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.

Frequency
Eight times a year.