8 November 2018
The Official Cash Rate (OCR) remains at 1.75 percent. We expect to keep the OCR at this level through 2019 and into
2020.
There are both upside and downside risks to our growth and inflation projections. As always, the timing and direction of
any future OCR move remains data dependent.
The pick-up in GDP growth in the June quarter was partly due to temporary factors, and business surveys continue to
suggest growth will be soft in the near term. Employment is around its maximum sustainable level. However, core consumer
price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.
GDP growth is expected to pick up over 2019. Monetary stimulus and population growth underpin household spending and
business investment. Government spending on infrastructure and housing also supports domestic demand. The level of the
New Zealand dollar exchange rate will support export earnings.
As capacity pressures build, core consumer price inflation is expected to rise to around the mid-point of our target
range at 2 percent.
Downside risks to the growth outlook remain. Weak business sentiment could weigh on growth for longer. Trade tensions
remain in some major economies, raising the risk that trade barriers increase and undermine global growth.
Upside risks to the inflation outlook also exist. Higher fuel prices are boosting near-term headline inflation. We will
look through this volatility as appropriate. Our projection assumes firms have limited pass through of higher costs into
generalised consumer prices, and that longer-term inflation expectations remain anchored at our target.
We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable
employment, and maintaining low and stable inflation.
• Read the Monetary Policy Statement: https://www.rbnz.govt.nz/monetary-policy/monetary-policy-statement
• Watch the Monetary Policy Statement press conference live-stream at NZT 10am: https://www.rbnz.govt.nz/research-and-publications/webcasts
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