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Lee Sue Ann, Economist at UOB Group, comments on the latest RBNZ meeting.

Key Quotes

“The Reserve Bank of New Zealand (RBNZ), at its May Meeting, decided to maintain the current stimulatory level of monetary settings – the Official Cash Rate (OCR) at 0.25%, and the Large Scale Asset Purchase (LSAP) and Funding for Lending (FLP) programmes unchanged.”

“In the accompanying media release, the RBNZ stated that the Committee agreed to maintain its current stimulatory monetary settings until it is confident that consumer price inflation will be sustained at the 2% per annum target midpoint, and that employment is at or above its maximum sustainable level. Meeting these requirements will necessitate considerable time and patience. However, unlike April’s media release, the RBNZ omitted the statement: “The Committee also agreed that it was prepared to lower the OCR if required”. In fact, the projections in the May Monetary Policy Statement indicate the cash rate may rise in the second half of 2022.”

“In all, we expect the RBNZ will continue to strike a cautious tone and stress that considerable monetary stimulus remains appropriate and is expected to remain so for quite some time. Despite the more positive tone at the latest meeting, we believe that policymakers at the RBNZ would want to wait for the true economic picture to become clearer, and stands ready to come out swinging if underlying momentum threatens to turn. Our call for now remains for the OCR to be unchanged at 0.25% until at least early 2023.”