Reserve Bank of New Zealand maintains official cash rate at 5.5%

The committee has stated that the OCR needs to remain at restrictive levels in the foreseeable future to ensure that annual consumer price inflation returns to the 1 to 3 per cent target range, whilst also supporting maximum sustainable employment.

In terms of the New Zealand economy, it is evolving as expected. Areas more sensitive to interest rates are experiencing slowing activity, with labour shortages beginning to ease as demand softens and immigration contributes to labour resources, the MPC said in a statement.

Despite a decline in headline inflation and inflation expectations, measures of core inflation in New Zealand remain high. Internationally, economic growth is under par, with headline inflation easing amongst trading partners, while core inflation remains high in various countries.

The weakening global economic growth is putting downward pressure on New Zealand's export prices, but the country’s demand and supply imbalance is moderating. However, subdued spending growth will still be needed for an extended period to better align the supply capacity of the economy and reduce inflation pressure.

There are risks ahead, including the possibility that activity and inflation might not slow as much as projected. In the medium term, a substantial slowdown in global economic demand, especially in China, could further influence commodity prices and New Zealand's overall export revenue, the statement added.

ALCHEMPro News Desk (KD)