The Reserve Bank of New Zealand held the cash rate at a 15-year high but surprised the market by indicating “limited” tolerance for high inflation.
Already a subscriber?The Reserve Bank of New Zealand extended its policy to keep interest rates on hold as the central bank navigates elevated inflation and a recession, but warned that more work is needed to get cost pressures under control.
“The addition of ‘this calendar year’ means that rates are in a holding pattern,” said Oliver Levingston, a rate strategist at Bank of America. “For the market, the statement was insufficiently dovish.” The RBNZ was among the first policymakers to withdraw pandemic-era stimulus in 2021 and has, since then, lifted the cash rate by 5.25 percentage points.However, the aggressive rate increases have tipped the economy into a recession, prompting investors to bet on rate cuts this year even as the central bank said it was unlikely because price growth at 4.7 per cent was still well above its goal.
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