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

Headline CPI inflation fell to 4.7 percent in the three months to December from 5.6 percent in the three months to September, with core inflation falling from 5.8 percent to 4.4 percent, its lowest level since mid-2021. In the statement accompanying today's decision, officials advised that they still expect inflation to trend lower towards their target range, judging that risks to this outlook are evenly balanced.

Reflecting this assessment, officials again concluded that"interest rates need to remain at a restrictive level for a sustained period of time". They also stressed that"there remains limited tolerance to increase the time to achieve the inflation target", suggesting they see little prospect of easing policy rates in upcoming meetings.

Though inflation has remained stubbornly high, at 4.7 percent in the fourth quarter, the Reserve Bank of New Zealand has been keeping policy steady. Consensus for April's meeting is once again no change for the policy rate 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.