The Reserve Bank of New Zealand's Monetary Policy Committee has left the official cash rate on hold at 3.25 percent, in line with the consensus forecast. Officials lowered policy rates by a cumulative 225 basis points over their previous six meetings after an extended period of restrictive policy settings.

In the statement accompanying today's decision, officials noted that inflation is likely to increase towards the top of their target range of 1 percent to 3 percent in the near-term, but they expressed confidence that it will remain within the range and return to around the mid-point of that range early next year. Although they expect domestic growth will be supported by previous policy easing, they cautioned that global trade tensions will likely slow the pace of economic recovery.

Reflecting this assessment, officials decided that they should wait for further data scheduled for release before their next meeting before adjusting policy further. They advised, however, that if medium-term inflation pressures ease as they anticipate, they will likely cut the cash rate further in coming meetings.

Most forecasters expect the RBNZ to hold rates steady at 3.25 percent this time with a 25 bp cut coming in September.

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.