RBNZ's Spencer keeps OCR at 1.75%, no hikes on the agenda until at least 2019
By Rebecca Howard
Feb. 8 (BusinessDesk) - Acting Reserve Bank governor Grant Spencer kept the official cash rate unchanged at 1.75 percent
and continued to signal that rates won't get raised until the latter half of next year at the earliest due to the lack
of inflationary pressure. The kiwi fell.
"Monetary policy will remain accommodative for a considerable period," Spencer said in a statement. "Numerous
uncertainties remain and policy may need to adjust accordingly."
The consumers price index rose at a slower pace than expected in the December quarter due to cheaper food and transport
prices, continuing the trend of inflation undershooting predictions. All 12 economists polled by Bloomberg predicted the
OCR would stay unchanged.
"Annual CPI inflation, at 1.6 percent, was lower than forecast for the December 2017 quarter. Measures of underlying
inflationary pressure remain low," the monetary policy statement said. The RBNZ expects headline inflation "to fluctuate
over the coming year, partly as a result of variable tradables inflation and the removal of fees for the first year of
tertiary education," it said.
The central bank lowered its inflation expectations but did not change its forecast track for the OCR. The bank
forecasts the OCR rising to 1.9 percent in June 2019, unchanged from its prior projection in November. A full rate
increase is still signalled by March 2020 when the benchmark rate is forecast to be 2 percent. The key rate is seen at
2.3 percent in December 2020 and 2.3 percent in March 2021, the end of the forecast period.
The Reserve Bank noted the New Zealand dollar is higher than it forecast in November "due in large part to a weak US
dollar." However, "we assume the trade-weighted exchange rate will ease over the projection period," Spencer said. The
New Zealand dollar fell after the statement and recently traded at 72.34 US cents from 72.56 cents immediately before
its release.
The MPS was the last full review of monetary policy before Adrian Orr begins as governor in March and signs a new policy
targets agreement (PTA) with Finance Minister Grant Robertson.
(BusinessDesk)
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