New Zealand: RBNZ holds OCR at 5.50% - UOB

Lee Sue Ann, Economist at UOB Group, reviews the latest interest rate decision by the RBNZ.

Key Takeaways

As expected, the Reserve Bank of New Zealand (RBNZ) decided to leave its official cash rate (OCR) unchanged at 5.50% at its Jul meeting. Since today’s decision was an interim review rather than a quarterly Monetary Policy Statement, there were no updated forecasts nor press conference with RBNZ Governor Adrian Orr.

New Zealand entered a technical recession in 1Q23, with the economy contracting by 0.1% q/q. Meanwhile, inflation undershot the RBNZ’s projection for two consecutive quarters. Headline CPI growth eased to 6.7% y/y in 1Q23. All eyes will now turn to 2Q23 CPI data due on 19 Jul, which is expected to see a further drop to 6.0% or lower. 

We are keeping our OCR forecast at 5.50% for the rest of this year, though bearing in mind that the RBNZ has paused in previous tightening cycles before hiking again. The next monetary policy decision is on 16 Aug.