NZIER’s Shadow Board recommends rates on-hold

NZIER’s Monetary Policy Shadow Board suggests that the Reserve Bank of New Zealand (RBNZ) keeps the Official Cash Rate (OCR) on hold this Thursday at 2%, however, there still remains an underlying preference for a rate cut.

Peter Wilson, Principal Economist at NZIER noted, “We are seeing solid momentum in the New Zealand economy, driven by strong domestic demand. But continued weak inflation and a strengthening New Zealand dollar are unhelpful for the Reserve Bank in achieving its 2 percent mid-point inflation target.”

“The Shadow Board recommends the Reserve Bank keeps the OCR on hold at 2 percent this Thursday, but suggests there is also scope for further easing. The tension between weak inflation and rapid house price acceleration remains very taut, with the higher New Zealand dollar also adding to the Reserve Bank’s dilemma. Nonetheless, the Reserve Bank’s primary focus on inflation means further easing is likely,”he added.

Meanwhile, the Shadow Board’s average recommended interest rate fell from 2.08% in August to 1.95% in September.