The Reserve Bank held the official cashrate (OCR) at 1.75% today, and new governor Adrian Orr said it would remain at 1.75% for some time to come.
His forecast? “The direction of our next move is equally balanced, up or down. Only time & events will tell.”
His assessment of economic conditions: “Economic growth & employment in New Zealand remain robust, near their sustainable levels. However, consumer price inflation remains below the 2% mid-point of our target, due, in part, to recent low food & import price inflation and subdued wage pressures.
“The recent growth in demand has been delivered by an unprecedented increase in employment. The number of willing workers continues to rise, especially with more female & older workers choosing to participate. Likewise, net immigration has added to the supply of labour and the demand for goods, services & accommodation.
“Ahead, global economic growth is forecast to continue supporting demand for New Zealand’s products & services. Global inflation pressures are expected to rise but remain contained.
“At home, ongoing spending & investment, by both households & government, is expected to support economic growth & employment demand. Business investment should also increase due to emerging capacity constraints.
“The emerging capacity constraints are projected to see New Zealand’s consumer price inflation gradually rise to our 2%/year target.
“To best ensure this outcome, we expect to keep the OCR at this expansionary level for a considerable period of time. This is the best contribution we can make, at this moment, to maximising sustainable employment and maintaining low & stable inflation.
“Our economic projections, assumptions, and key risks and uncertainties, are elaborated on fully in our monetary policy statement.”
Attribution: Bank release.