The Reserve Bank has announced that the Official Cash Rate (OCR) will remain at 1.75%, and will likely be kept at this level through 2019 and into 2020.
It noted that there are both upside and downside risks to its growth and inflation projections, and as always, the timing and direction of any future OCR move remains data dependent.
Business surveys continue to suggest that growth will be soft in the near term, and GDP growth is expected to pick up over 2019. Core customer price inflation is expected to rise around the mid-point of the Reserve Bank’s 2% target range.
“Weak business sentiment could weigh on growth for longer,” the Reserve Bank stated. “Trade tensions remain in some major economies, raising the risk that trade barriers increase and undermine global growth.”
Commenting on the announcement, CoreLogic senior analyst Kelvin Davidson said: “Today’s OCR decision was no surprise. Inflation remains well contained and the labour market is strong. In other words, the RBNZ’s dual mandate is being met with the OCR at its current level.
“One key aspect of the announcement was that it did not contain the phrase “the direction of our next OCR move could be up or down,” Davidson noted. “It may have already been absent prior to yesterday’s labour market data, but whatever the case, the drop in the unemployment rate has now seemingly taken a near term rate cut off the table.
“Even so, all of this points towards a benign environment for borrowers.”