The Reserve Bank of New Zealand’s monetary policy meeting was largely a non-event as it was partly overshadowed by the Fed’s announcement to hike interest rates.
The central bank meeting which followed a few hours after the Fed meeting last Wednesday saw the RBNZ OCR held at 1.75% in March. The central bank kept rates steady at 1.75% since September 2016.
The RBNZ’s policy meeting was largely expected by the markets. It was also the last monetary policy meeting to be chaired the acting RBNZ Governor, Grant Spencer. The new governor, Adrian Orr is expected to take over as the next governor of the Reserve Bank of New Zealand.
The RBNZ meeting did not see the release of any economic projections with investors focusing on the post-monetary policy meeting press conference. However, the press conference did not offer any surprises for investors either.
About inflation, the RBNZ said that it expects inflation to weaken further in the near term. The central bank cited the soft patch in food and energy prices and the adjustments to the government charges as one of the reasons for inflation to remain low.
In the medium term, inflation is forecast to rise towards the central bank’s mid-point target of 1% to 3%.
The RBNZ also noted that weaker than expected growth seen in the fourth quarter of 2017 was mainly due to the weather effects on agricultural production and noted that the soft patch was most likely temporary.
New Zealand’s fourth-quarter GDP was seen rising just 0.6% which missed the RBNZ’s forecasts of 0.7%. Economists are now forecasting that growth in the first half of the year will also fall short of the RBNZ’s forecasts on growth.
“Growth is expected to strengthen, supported by accommodative monetary policy, a high terms of trade, government spending and population growth,” the RBNZ’s monetary policy statement said noting that “labor market conditions are projected to tighten further”.