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MNI BRIEF: RBNZ Holds Steady At 5.5% As High OCR Bites

(MNI) Sydney

The Reserve Bank of New Zealand’s Monetary Policy Committee left its official cash rate unchanged today at 5.5%, holding steady for the first time since August 2021 as inflation declines from its peak and the country’s economy slows.

In a statement, the committee said rates would need to remain restrictive for the foreseeable future, "to ensure consumer price inflation returns to the 1-3% target range, while supporting maximum sustainable employment."

“Core inflation is expected to decline as capacity constraints ease,” the MPC noted. “While employment is above its maximum sustainable level, there are signs of labour market pressures dissipating and vacancies declining.”

The change was largely expected (see: MNI RBNZ WATCH: OCR Likely To Hold At 5.5% After May Steer). New Zealand’s economy recently slipped into a technical recession, while the MPC noted the OCR had likely peaked when it hiked in May (see: MNI RBNZ WATCH: Lower GDP Surprise, Higher OCR Working).

The overnight index swap spread repriced its peak OCR following the decision, down to 5.6% by November from the 5.75% expected earlier. New Zealand Government bonds were slightly richer following the announcement (see: NZGBS: Slightly Richer After RBNZ Leaves OCR At 5.50%).

Daniel covers the Reserve Bank of Australia and the Reserve Bank of New Zealand and leads the Asia-Pacific team.
Daniel covers the Reserve Bank of Australia and the Reserve Bank of New Zealand and leads the Asia-Pacific team.

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