New Zealand: NZIER’s Shadow Board sees little urgency for rate increase

The latest recommendation by the New Zealand Institute of Economic Research - NZIER - Monetary Policy Shadow Board is broadly unchanged from the previous meeting in May.

Key Quotes

The Shadow Board again recommends the Reserve Bank leave the Official Cash Rate on hold this Thursday at 1.75 percent, with a tightening bias.

“The New Zealand economic outlook remains positive, and annual inflation lifted to 2.2 percent for the year to March. While higher food and fuel prices have largely driven the recent pick-up in inflation, and may be transitory only, there are also signs that underlying inflation is continuing to lift.” said Christina Leung, Senior Economist at NZIER.

“However, any further lift in inflation is expected to be gradual, and downside risks remain due to heightened geopolitical risks from offshore. These factors suggest that while interest rates should go up, for now there is little urgency. NZIER continues to expect the Reserve Bank to begin lifting the OCR from the middle of 2018.”

The Shadow Board’s average recommended interest rate remained steady at 1.82 percent.