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Ahead of the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision this week, the New Zealand Institute of Economic Research (NZIER) said that its shadow board members expect the central bank to maintain its monetary policy settings.  

However, they see a tightening in monetary policy over the coming year.

Key takeaways

In the near term, members pointed to some uncertainty over how sustainable the recovery will be particularly in light of continued border restrictions. Hence members saw a cautious approach as justified for the upcoming meeting.

Beyond that, members saw a tightening in monetary policy as appropriate given the strengthening New Zealand economic outlook and higher inflation pressures.

Some members pointed to the slowing in bond purchases by the Reserve Bank under its Large-Scale Asset Purchase programme (LSAP) that was already underway and considered an increase in the Official Cash Rate after the LSAP programme was wound down as appropriate for the coming year.

The continued strength in house prices was highlighted by some members as remaining an area of concern for the New Zealand economy.

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