New Zealand's central bank held its cash rate steady today, as expected, cautioning that interest rates need to remain restrictive for a sustained period to drive inflation down to its 1% to 3% target.
The decision was in line with expectations from all 29 economists in a Reuters poll, which forecast the Reserve Bank of New Zealand would leave the cash rate at a 15-year high of 5.5% for the sixth consecutive meeting.
"Ongoing restrictive monetary policy settings are necessary to reduce inflation, while avoiding unnecessary instability in output, employment, interest rates and the exchange rate," minutes from the committee meeting said.
The RBNZ's statement matched caution among central banks globally around cutting rates too soon while they gather more evidence that inflation is moving lower.
The RBNZ added the balance of risks was little changed since its February statement. It does not release updated economic indicators or the forecast official cash rate track at Monetary Policy Reviews (MPR).
ANZ chief economist Sharon Zollner said the release was "a placeholder" and they expect that the RBNZ will require considerably more certainty before contemplating cuts.
The minutes show "the Committee discussed a range of upside and downside risks to the inflation outlook, but saw nothing to cause them to deviate from their 'watch, worry and wait' stance, with no need nor desire to take a strong stance on when cuts will come at this point," she added, noting the April statement was the shortest she could recall.
Investors continued to bet the first rate cut will come in August, with a 92% conviction, although that compared with more than 100% earlier. They see an easing of 60 basis points (bps) this year, down slightly from 63 bps before the decision.
A front-runner in withdrawing pandemic-era stimulus among its peers, the RBNZ has battled to curb inflation, lifting rates by 525 basis points since October 2021 in the most aggressive tightening since the official cash rate was introduced in 1999.
New Zealand's annual inflation has come off in recent months and is currently 4.7%, with the central bank forecasting it will return to its target band this calendar year.
The rate hikes have sharply slowed the economy with recent data showing that New Zealand tipped into a technical economic recession in the fourth quarter of 2023.
