Cash rate staying put

The Reserve Bank of New Zealand has decided to hold the official cash rate at 5.5 per cent and notes monetary policy needs to remain restrictive until inflation pressures start to decline.

The decision comes after the monetary policy committee noted such policy has reduced consumer price inflation and it expects headline inflation to return to within the one to three per cent target range in the second half of this year.

“Some domestically generated price pressures remain strong. But there are signs inflation persistence will ease in line with the fall in capacity pressures and business pricing intentions,” it said

It also says labour market pressures have eased and current and expected government spending will restrain overall spending in the economy. 

However, the committee, which met on July 10, adds the positive impact of the pending tax cuts on private spending is less certain.

Global economic growth remains below trend and is expected to pick up only gradually over the next year, with the economic outlook varying among New Zealand’s trading partners.