Reserve Bank holds Official Cash Rate

The Reserve Bank has left the Official Cash Rate (OCR) unchanged at 0.25 per cent after its latest monetary policy review.

Large-scale asset purchase and Funding for Lending programmes will also be left as they are, even though the bank expects headline inflation to climb above two per cent for a period. 

However, members of its Monetary Policy Committee believe the impact on inflation from supply chain disruptions and rising oil prices will be temporary.

Adrian Orr, Reserve Bank governor, says the global economic outlook has improved since its monetary policy statement in February, although economic uncertainty remains for many countries. 

He notes economic activity in New Zealand slowed over the summer months following and earlier rebound in consumer spending.

The bank is cautious about the opening of the trans-Tasman travel bubble from April 19 and adds “the net impact on overall domestic spending will be determined by the two-way nature of this travel”.

“Overall, our medium-term outlook for growth remains similar to the scenario presented in the February statement,” says Orr, pictured.

“This outlook remains highly uncertain, determined in large part by both health-related restrictions, and business and consumer confidence.”

The Reserve Bank says it remains prepared to lower the OCR if necessary.

A summary of the committee’s meeting adds the extent of the government’s new policies on dampening house price growth, and consumer price inflation and employment, will “take time to be observed”.

“The committee agreed that any increase in bank lending rates would be premature given the current economic outlook,” it explains.

Committee members expect “a prolonged period of time to pass” before there is any major change in monetary policy.