New Zealand Holds Key Rate; Eyes Future Policy Tightening
(RTTNews) - The Reserve Bank of New Zealand unexpectedly retained its key interest rate on Wednesday after two consecutive rate hikes and signaled tighter policy ahead.
The Monetary Policy Committee, governed by Anna Breman voted 4-3 to hold the Official Cash Rate at 2.75 percent, defying market expectations for a 25 basis point hike. The bank had lifted the rate by a quarter-point each in July and September.
"The Committee agreed that tighter monetary policy is likely to be required but remains conditional on the economic outlook," the bank said in a statement.
The majority of members determined that the two recent rate increases warrant additional time to assess their effects on the economy.
Moreover, actual inflation was lower than expected, medium-term inflation expectations and wage growth remained consistent with returning inflation to the target mid-point, they noted.
Inflation is forecast to rise to 4.4 percent in the December quarter, driven largely by current futures prices for fuel. The committee acknowledged that uncertainty in near-term inflation forecasts was due to volatility in oil and refined fuel prices.
The New Zealand economy continues to recover, although conditions remain uneven, the MPC noted.
All members agreed on the overall outlook for inflation. However, members differed in how much weight they placed on various risks and the timing of the monetary policy response, the bank said.
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